W.R. Berkley Ratings Affirmed From Fitch

October 8, 2004

Fitch Ratings has affirmed the fixed income ratings on W.R. Berkley Corp. (Berkley). In addition, the insurer financial strength ratings of Berkley’s major insurance underwriting subsidiaries were also affirmed. The Rating Outlook is Stable.

The rating action is based on Berkley’s performance and credit position aligning with Fitch’s expectations. Berkley’s strengths include a diverse source of operating earnings, strong niche market positions in several lines, flexible operating environment which allows for quick market entrance and exit, good long-term financial results and niche underwriting focus.

In recent favorable market conditions, Berkley has recorded very strong operating results. This follows a five-year period ending in 2001 during which Berkley’s aggregated earnings were just slightly above break-even. Recent results indicate that Berkley’s operating results are above average in favorable market conditions and below average in soft market conditions.

Berkley maintains above average leverage risk – financial and operational – on its balance sheet. Further, continued reserve strengthening indicates reported financial and operating leverage ratios have been understated in recent periods. The leverage concerns are compounded by Berkley’s modest capitalization of its insurance subsidiaries. The largest domestic insurance subsidiary’s statutory capitalization is often near regulatory minimums as defined by the NAIC risk-based capital ratio.

Along with Fitch’s opinion that operating results and balance sheet measures will fluctuate, Berkley is also expected to generate very strong earnings in favorable markets.

As such, the company’s underwriting and profitability performance is expected to report very strong results during the remainder of 2004 and into 2005. Reported financial leverage will remain in the 25%-35% range long-term and subsidiary surplus and regulatory capital ratio levels are not expected to weaken.

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