Converium renews GUAM fronting arrangement
Converium has renewed its fronting arrangement with Berkshire Hathaway’s National Indemnity Company and Munich Re which enables the Swiss Reinsurer to continue as a member of the aviation pool Global Aerospace Underwriting Managers Ltd until 30 September 2006.
Converium arranged for National Indemnity and Munich Re to each front 50 percent of Converium’s 27.5 percent stake in the pool last year following Standard & Poor’s decision to downgrade the company below the critical A- rating.
In a statement, Converium said it was keen to continue with the fronting because it “supports its commitment to aviation business, which constitutes one of its important lines of business”. The reinsurer continued by adding that the arrangement will “contribute to accelerating the restoration of a leading position in aviation reinsurance following a future ratings upgrade”.
Separately, the reinsurer increased its loss estimates from Katrina last week from $20mn-$40mn, up from $10mn-$20mn. Converium explained that the revision was now based on an industry loss figure of $50bn as opposed to its earlier estimates of $25bn. In a statement, the company explained: “The revised loss amount represents about 1–2 percent of Converium's shareholders' funds as of 30 June, 2005 and is reflective of the Company's reduced exposure in North America as a result of having placed Converium Reinsurance (North America) Inc. into run-off as well as the decision to write North American business from Zurich on a selective basis only”.