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Guy Carpenter Issues Third Annual Survey of Specialty Program Issuing Carriers

Markets Actively Seeking Profitable New Business from New Program Administrators and Existing Partners by Building Product and Volume

New York, October 11, 2007 - Guy Carpenter & Company, LLC, the leading global risk and reinsurance specialist and a part of the Marsh & McLennan Companies (NYSE: MMC), today published its third annual survey of domestic insurance companies that write specialty program business through program administrators. The survey examines issuing carriers and their appetites for program business, touching on program administrator criteria, claims administration requirements, monitoring and control practices, reinsurance purchasing practices and views of specialty program market conditions.

According to the survey results, specialty program markets appear to be actively seeking profitable new business, both from new program administrators and existing partners, by building product and volume. Underwriting appetites remain robust across multiple lines, with carriers looking for new ways to maintain premium writings while maintaining profitable rate levels.

“Change and evolution are the watchwords in the specialty programs marketplace,” said Carl Bach, Senior Vice President and head of Guy Carpenter’s Program Manager Solutions Specialty Practice. “We are seeing a continued flow of new capital into this market segment, resulting in the emergence of new markets as well as ongoing merger and acquisition activity.” Mr. Bach added, “Based on this year’s survey results, we expect carrier markets operating in this space to be interested in most program opportunities presented in 2007. However, the key to successful marriages between program administrators and carriers is a clear understanding of carrier requirements, program needs, as well as program administrator experience, expertise and servicing capabilities.”

Among respondents to this year’s survey, 50 percent estimate the size of the program administrator specialty program market segment at $20 billion to $30 billion of annual gross written premium, with the remainder of respondents split between less than $20 billion (27 percent) and greater than $30 billion (23 percent). These numbers indicate a perceived smaller market size than noted in last year’s survey. In addition, 48 percent of respondents describe themselves as writing specialty programs exclusively, as compared to 65 percent in 2006.

Regarding premium growth and expansion, respondents indicated they are looking to both new and existing program administrators for premium growth and expansion. Adding new lines of business to existing programs (69.6 percent), expanding territory (60.9 percent) and growing by acquisition (43.5 percent) were other key responses.

Among the survey’s other key findings:

• Growing program appetite: Carriers continue to look for growth across most commercial lines of business, including general liability, property, auto, professional and inland marine. The two most notable changes from last year’s survey were in the workers compensation line, where 48 percent of the respondents are looking to grow their books (a 20 percent increase) and umbrella liability, where only 26 percent of the respondents are looking for growth (versus 65 percent last year).
• Personal lines: This year’s survey indicates a lessening interest from responding companies in growing their personal lines programs, with 60.8 percent of respondents indicating a desire to grow personal lines, as compared to 65 percent in 2006. Interest in homeowners growth dropped 28 percent from a year ago, while umbrella decreased 13 percent. There does, however, appear to be an interest in growing personal auto as 30 percent of respondents are seeking growth in this line as compared to 25 percent in 2006.
• Geographical preferences: Consistent with the 2006 survey, responding carriers seem to prefer regional programs (65.2 percent), as opposed to national (26.1 percent) and single-state (8.7 percent) programs. Only single-state programs differed significantly from 2006, down 13 percent.
• Claims administration: Responding carriers are becoming more flexible in their use of third-party administrators (TPAs) to manage claims. Though many still require or prefer that claims be handled internally, others appear comfortable utilizing TPAs. While 31.8 percent allow the use of TPAs, down from 45 percent in 2006, 54.5 percent prefer to use their own in-house claim department (up from 40 percent last year), and 13.6 percent require the use of their in-house claim department. Last year, 15 percent of the respondents required use of their in-house claim department, down from 25 percent in 2005. Forty-two percent of responding carriers, however, will not allow the use of a program administrator-owned TPA, although this figure is down from the more than 75 percent who said it was not acceptable in 2006.

Copies of the survey results are available for download at www.guycarp.com. Printed copies can be obtained by contacting Guy Carpenter at marketing@guycarp.com.

Guy Carpenter & Company, LLC is the world’s leading risk and reinsurance specialist and a part of the Marsh & McLennan Companies. Guy Carpenter creates and executes reinsurance solutions and makes available capital market solutions* for clients worldwide through 2,600 professionals across the globe. The firm’s full breadth of services includes 16 centers of excellence in Accident & Health, Agriculture, Alternative Risk Transfer, Environmental, General Casualty, Investment Banking*, Life & Annuity, Marine & Energy, Professional Liability, Program Manager Solutions, Property, Retrocessional, Structured Risk, Surety, Terror Risk, and Workers Compensation. In addition, Guy Carpenter’s Instrat® unit utilizes industry-leading quantitative skills and modeling tools that optimize the reinsurance decisionmaking process and help make the firm’s clients more successful. Guy Carpenter’s website address is www.guycarp.com.