Guy Carpenter Publishes Casualty Specialty Update

London, September 11, 2007

Guy Carpenter & Company, LLC, the leading global risk and reinsurance specialist and a part of the Marsh & McLennan Companies (NYSE: MMC), today announced the publication of Casualty Specialty Update. The report, prepared by Guy Carpenter’s International Casualty Specialty Practice, covers the areas of liability catastrophe modelling, European environmental liability legislation and the impact of Basel II banking accords on insurers and reinsurers.

“Most insurers have concentrated on their exposure to potential catastrophe losses but have paid little attention to the liability classes, partly because no reliable modeling approach has been developed,” said George Carrington, Managing Director and a member of Guy Carpenter’s International Casualty Specialty Practice.

“It’s clear that a different approach to modelling these liability risks is required if useful results are to be obtained, and this report outlines a number of steps we have taken to move toward developing a probabilistic casualty catastrophe model.”

In addition, the report examines two areas of growing importance in the European market–the transposition of the EU environmental liability directive (ELD) into national laws and the state of Basel II-compliant insurance policies.

“With regard to the adoption of ELD, there remains a high degree of uncertainty, as well as latitude in the directive itself, that is likely to result in variations from one country to the next,” added Mr. Carrington. “Overall, we believe that the trend will be toward a minimal application of the directive. The insurance and reinsurance market certainly cannot afford to delay its response to the ELD until transposition is complete, because the provisions apply retroactively back to April 30, 2007 and potentially have an indirect effect on many existing policies. We expect the insurance and reinsurance market to respond positively to the required changes. ”

Adoption of Basel II-compliant insurance policies has been sporadic, involving only a
handful of banks, mostly in France, where regulators have been more welcoming of the Basel II approach than their counterparts in other territories. The report concludes that a definitive strategy towards Basel II compliant insurance policies has yet to be established, with some carriers discussing alternative ‘market solutions.’

 

A copy of the report is attached..