BERMUDA TOUTS FLEXIBILITY

CANCUN, Mexico--Bermuda continues to be at the forefront of creating solutions to meet customers' complex insurance and financial needs, industry executives say.

A trio of Bermuda insurance companies showcased some of those solutions and new initiatives for risk managers and brokers during a seminar in Cancun, Mexico, last week sponsored by broker Park International Ltd.

Participating in the forum were representatives of ACE Ltd., Chubb Atlantic Indemnity Ltd. and EXEL Ltd., who provided overviews of their capabilities and recent developments.

ACE Ltd. has expanded significantly beyond its core excess liability insurance line.

ACE's diversification began in earnest in 1994, when it branched into the satellite and aviation business, and the next year it entered financial lines and property insurance, according to Fiona Luck, executive vp. More recently, it has formed a political risk managing general agency in partnership with EXEL Ltd., made significant acquisitions within Lloyd's of London and bought catastrophe reinsurance companies.

It also has entered the U.S. market through its acquisition of the Westchester Group, now under the umbrella of ACE U.S.A.

Ms. Luck heads up ACE's financial lines division, which provides customized programs that involve risk transfer. The division, which began as the home for any non-traditional programs, has grown to become the largest single department within ACE, she said.

A "traditional" financial lines program is one that generally has no restriction on exposure but must be structured to meet certain requirements, Ms. Luck explained. Among the requirements, it must be a multiyear program; it must have the policyholder's participation in results; it must have significant risk transfer; and it must offer annual and term limits.

Examples of insured risks include second event coverage, retention funding, loss portfolio transfers and basket aggregate programs, also known as concentric risk financing.

Also branching out from excess liability business is Chubb Atlantic, said Christopher Longo, president of the Bermuda subsidiary of Chubb Corp.

"All the things Chubb can do in the U.S. can be done in Bermuda, too. But Chubb Atlantic was really formed to offer non-traditional products," he said.

Some recent Chubb Atlantic programs include: punitive damages wraparounds, which finance this expense in states where punitive damages are not insurable; penalty premium protection, which protects policyholders at risk of having to pay retrospective penalty premiums, such as under a multiyear policy; and a $100 million excess liability program that follows the form used by utility industry insurers Associated Electric & Gas Insurance Services Ltd. and Energy Insurance Mutual Ltd.

Chubb Atlantic also will provide financial guarantees and residual value insurance, as well as blended products that combine, for example, errors and omissions and employment practices liability coverage.

Chubb Atlantic derives about 30% of its premiums from providing reinsurance to captives, especially in the area of E&O coverage.

To formalize this business, the company earlier the year formed Chubb Atlantic Reinsurance Specialists Ltd. (BI, April 6).

To further serve the captive insurance market, Chubb Atlantic is rolling out a new product this week called CaptivEdge. CaptivEdge provides integrated directors and officers, E&O and EPL coverages for captives, depending on their individual needs. The program is designed to cover the risks faced by executives or employees of captive insurers.

EXEL is moving to take advantage of the convergence of insurance and capital markets, said Chairman and Chief Executive Officer Brian O'Hara.

"The vision of EXEL is to be the premier provider of strategic financial solutions," Mr. O'Hara said.

To better serve its customers, EXEL reorganized its operations into "customer business units" rather than along product lines. This focus encourages cross-selling of products, as well as finding new solutions for customers in similar industry segments, said Paul Dowden, a managing director.

Some of the new programs EXEL offers include: broad EPL coverage on a primary or excess basis; cross-class aggregate coverage, which protects against the risk of multiple deductibles or retentions being triggered by a single event; foreign exchange rate protection, in the form of a product called F/XL; and transmission and distribution coverage for utilities, among others. All of the products can be customized for coverage period, coverage triggers and terms.

EXEL's Mr. O'Hara summed up Bermuda's attraction as a marketplace for risk financing solutions.

"Bermuda continues to be at the forefront of change. The skills brought to bear originally on casualty business solutions are now being applied to many other areas," Mr. O'Hara said.