Insurance

Our terrorism position will continue as heretofore. It is our intention to avoid another WTC type loss. That is, a single terrorist loss greater than $20 million. Our Corporate retrocession continues not to cover this exposure going forward and we cannot risk our balance sheet to a large net loss.

This must be achieved through the use of exclusionary language or the underwriting of the risk. Ideally we would like to see exclusion on all business, however, we realize that there is business with little to no exposure from this type of loss and we do not wish to lose good business. The main exposures will come from a "large risk" loss due to terrorism (defined as any one risk or accumulation of risks to us that exceed our net retention of $20 million from a terrorist act). Given our line sizes, this will come from the following classes of business:

Property Facultative

Property Catastrophe

Property Per Risk

Proportional

Casualty Per Risk

Casualty Catastrophe / Clash

Casualty Facultative General Liability

Direct Property & Casualty

TREATY

We seek to exclude terrorism on all treaty contracts perceived to have an exposure to a market loss occurrence from this type of a peril. Therefore All National Account & Specialty writers of large property risk business (original risks greater than US$50 million) must have some form of a contract exclusion.

We take a more tailored approach with respect to terrorism coverage for our regional accounts portfolio and may provide a very limited amount of terrorism coverage in non-metropolitan areas. As respects to NBC coverage we take an even more restrictive approach, seeking to exclude or selectively limit coverage on commercial risks for this same regional book with CUO approval.

The main exposure from a terrorism loss is from a certified "large risk" loss, this defined as any one risk or accumulation of risks to QBE that exceed $20 million from a terrorist act. Given our line sizes, these losses could emanate from the following types and classes of business in our portfolio; therefore we have the following loss mitigation guidelines.

Our Guidelines by major type are as follows:

o Proportional (excluding automobile).

Ð'§ All quotations are subject to terrorism exclusionary language within the treaty wording or on the underlying primary policies.

Ð'§ For the smaller regional accounts that write non-accumulating business in rural areas we can consider allowing limited terrorism coverage for non-certified events. All contracts will be subject an overall event limit.

o Excess of Loss (excluding Automobile and Catastrophe).

Ð'§ All quotations are subject to terrorism exclusionary language within the treaty wording or on the underlying primary policies.

Ð'§ We may consider extending terrorism coverage for cedants who write only in non-metropolitan areas in our regional portfolio. This coverage must have a restrictive occurrence limit for the peril and we must determine that a potential event can only add an attritional loss to the portfolio and is subject to SVP approval.

o Property Catastrophe.

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