Trenwick to Cease Underwriting U.S. Specialty Program Insurance

October 31, 2002

Bermuda-based Trenwick Group Ltd. announced today that it will cease underwriting U.S. specialty program insurance business effective immediately. The news follows the announcement of an agreement to create an underwriting facility with Chubb Re, and a review of the company’s reserves for loss and loss adjustment expenses at each of its operating subsidiaries. (See IJ Website Oct. 28)

Trenwick underwrote U.S. property and casualty insurance through specialty program administrators, operating under the name Canterbury Financial Group Inc. and through its subsidiaries The Insurance Corporation of New York, Chartwell Insurance Company and Dakota Specialty Insurance Company.

It said it would “continue to administer and pay claims in connection with the insurance policies previously underwritten by the Canterbury Financial Group,” and will “work with its specialty program administrators to attempt to facilitate appropriate transitions for their existing books of insurance business.”

The company also said it would “record a charge in the fourth quarter of 2002 for the expenses it expects to incur in connection with the termination of its U.S. specialty program insurance business.”

W. Marston Becker, Trenwick’s Acting Chairman and Acting CEO, stated that, “The cessation of our U.S. specialty program insurance operation is an unfortunate, but critical element of the necessary restructuring of Trenwick’s business. The reduction in premium volume from the termination of Trenwick’s U.S. specialty program insurance operation will significantly reduce Trenwick’s operating leverage and permit it to focus its financial resources on those segments of its business that we believe have the greatest potential for profit.”

On Tuesday Standard & Poor’s announced that it was lowering the counterparty credit and financial strength ratings on Insurance Corp. of New York and Dakota Specialty Insurance Co. to double-‘B’ from triple-‘B,’ and its ratings on Trenwick International Ltd. and Chartwell Insurance Co. to single-‘B’-plus from double-‘B’-plus. It also indicated that it believed that “certain operating companies may be placed into runoff.”

“The lowered ratings are the result of Trenwick America Reinsurance Co. (TARCO) no longer writing business on its own paper, the considerable uncertainty about whether its banks will renew letters of credit that allow continued underwriting at Lloyds, and by the potential for additional reserve development signaled by the announcement of a fourth-quarter 2002 reserve study,” stated S&P credit analyst Karole Dill Barkley.

“TARCO no longer writes business on its own paper but rather has entered into an underwriting arrangement with Chubb Re to front renewals of TARCO business on its behalf. This arrangement reflects a significantly reduced business position prospectively, with long-term implications as yet uncertain,” said the announcement.

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