Conning & Company Study Finds e-business Coverage Risks may Outweigh Rewards for Insurers

(Hartford, CT) March 18, 2002 – Businesses’ increased use of the
Internet is creating a substantial growth opportunity for the emerging e-business
insurance market, but e-business insurance may not be a good market for every insurer,
according to Conning & Company.

Only a handful of insurers have jumped into the e-business
insurance marketplace. However, as many other insurers develop their e-business
strategies, a new study from Conning & Company recommends taking a cautious approach.
There are many questions about both the short-term and long-term viability of e-business
insurance that are difficult to answer such as how rapidly the market will grow and how
the industry can manage the global scale risk for Internet-related catastrophes.

Conning’s study, “E-business Insurance Products –
Emerging Market or Specialty Coverage?” reports that insurers need to consider many
factors before entering this marketplace with an estimated 100% annual premium growth
rate. However, there may be substantial rewards for successful insurers. If the e-
business market expands rapidly, Conning projects that premiums can mushroom to $6 billion by 2006.

“It’s easy to see the rise in e-business loss
exposures; it is more difficult to predict how these exposures will translate into
insurance coverages and premium dollars,” said Clint Harris, Vice President and
author of the study. “E-business is redefining the what, when, where, how and how
much of business loss exposures. When things go wrong on the Internet, they do so at
lightning speed. Devastating losses can hit businesses anywhere in the world.”

Hackers and viruses threaten any business connected to the
Internet, even those just receiving email. Indications are that threats will continue to
escalate as virus creators are able to exploit increasingly sophisticated malicious code
and as businesses become more dependent on the Internet for their internal operations as
well as customer service and sales.

The e-business insurance market has not yet evolved as
rapidly as the associated risks. Despite the growth in e-business loss exposures there are
few insurers offering standalone insurance coverage for both first- and third-party
e-business exposures. As a prerequisite for market entry, insurers must understand,
anticipate and quantify individual risk and accumulation loss exposures that are still
rapidly evolving. Changes in technology, statutes and case law precedents add extra
complexity to the development of coverage, loss control, pricing and distribution
strategies. Insurers face a multitude of considerations in order to determine
“if,” “when” and “how” to enter the e-business insurance marketplace.

Conning’s new study provides an environmental scan of the
current e-business marketplace and introduces three market growth models– Rapid
Expansion, Assimilation and Divided Markets. The also study identifies and analyzes market
entry and exit considerations that are unique to e-business insurance.

“E-business Insurance Products– Emerging Market
or Specialty Coverage?” is available from Conning & Company for $900 by calling
toll free (888) 707-1177 or (860) 520-1521. A complete listing of all Conning Strategic
Studies can also be found by visiting the company’s Web site at

About Conning

Conning Corporation, through its subsidiaries, provides asset management services to
insurance companies and institutional investors, manages private equity funds investing in
financial services companies, and conducts in- depth research on the financial services
industry. Conning & Company (member NASD/SIPC) is located at Cityplace II, 185 Asylum
Street, Hartford, CT 06103.