California State Automobile Association Inter-Insurance Bureau (CSAA), Carvill, Inc., and Tempest Reinsurance Company Limited, a wholly-owned subsidiary of ACE Limited (NYSE: ACL), have completed the market's first reinsurance contract to protect against the combination of a property catastrophe loss and negative returns on an equity portfolio.

Called "Asset-Linked Catastrophe Protection," the policy was written to protect CSAA from the combined impact of a catastrophe, such as an earthquake, and a negative return from their equity market investments.

Mr. George Rivaz, COO of Tempest Re, commented, "We have been working on combining asset and insurance protection for the last year and welcomed the opportunity to use our integrated catastrophe and financial modeling tools for CSAA. We view the convergence of catastrophe protection and asset performance coverage as a natural development in the increasingly sophisticated use of reinsurance."

Mr. James P. Molinelli, CSAA's President and Chief Executive Officer, said, "We at CSAA see this layer of protection as an extremely cost effective way to extend our traditional reinsurance program and to manage two of our most significant risks in an integrated fashion."

Asset-Linked Catastrophe Protection manages traditional catastrophe exposures by more efficiently matching reinsurance coverage to a client's balance sheet fluctuations. In years when the equity market and surplus gains are strong, the cedant can retain more risk, whereas if the equity market is in decline and the surplus is under pressure, the reinsurance program can expand to provide additional protection for catastrophic events.

Mr. Peter B. Scanlan, President of Carvill, noted, "Although these innovative approaches are not a replacement for traditional catastrophe reinsurance, there are numerous new methods to meet specific coverage and pricing needs of a divergent group of clients. The sophistication of today's reinsurance buyers calls for a broad spectrum of response capability and reinsurance sellers are eagerly looking for ways to responsibly meet these needs."

Mr. George Rivaz, COO of Tempest Re, added, "Broadening the scope of reinsurance products to meet needs previously not addressed is an important part of our approach to this business. At Tempest Re, we are constantly looking for ways to make catastrophe reinsurance more effective."

California State Automobile Association Inter-Insurance Bureau

CSAA, an affiliate of the American Automobile Association, provides automotive and travel services to its four million members in Northern California, Nevada and Utah. Its inter-insurance bureau underwrites more than $1.5 billion of personal auto and homeowners insurance.

Tempest Reinsurance Company Limited  

Tempest Re is a wholly owned subsidiary of the ACE Group of Companies, a multinational group, which provides insurance and reinsurance for a diverse group of international clients. Operating subsidiaries of ACE Limited are based in Bermuda, the United States, the United Kingdom (Lloyd's) and the Republic of Ireland. At December 31, 1998, ACE Limited had approximately $8.8 billion in assets and approximately $3.9 billion in shareholders' equity.

On January 12, 1999, ACE Limited agreed to acquire the international and domestic property and casualty insurance businesses of CIGNA corporation for $3.45 billion in cash. The transaction, which is subject to receipt of necessary regulatory approvals and other customary closing conditions, is expected to be completed by the end of ACE's fiscal 1999 third quarter.

Carvill, Inc.  

Carvill, Inc., a privately held reinsurance intermediary, has been a leader in assisting its clients in designing and buying highly efficient, effective risk transfer mechanisms.

Contact Information

Media Contact: Wendy Davis Johnson ACE Limited (441) 299-9347