Marsh Bringing New Capacity to the Property Catastrophe Risk Market Through Innovative Insurance Offering

Large Corporate Clients Gaining Needed Property Coverage with Highly-Rated Insurer

NEW YORK--()--Marsh Inc. today announced the creation of MaRI (Marsh Risk Innovations), a first-of-its-kind insurance facility designed to provide additional capacity to the depleted property catastrophe insurance market this year. This new facility is unique in that it delivers capital market capacity through an A+ rated* insurer with admitted paper directly to major corporations in need of additional property catastrophe coverage.

The additional capacity will be made available through reinsurance provided by MaRI, Ltd., a newly-formed Bermuda-based reinsurer, to ACE, a leading Bermuda-based insurance company. Marsh collaborated with ACE and Morgan Stanley, which served as structuring advisor and placement agent, to create MaRI. This new facility provides large corporate clients of Marsh with exclusive access to insurance capacity intended to fill gaps that are creating instability and shortfalls in property catastrophe risk coverage.

Traditionally, this form of extra risk capital commonly referred to in the industry as a sidecar allows reinsurers to offer more capacity to their clients, the retail insurers. What makes the MaRI structure innovative is that it provides Marsh clients with direct access to the capital markets through a highly-rated ACE delivery vehicle.

In the wake of the 2005 U.S. hurricane season and growing concerns about natural disasters in the years ahead, obtaining sufficient insurance coverage for catastrophic loss has been extraordinarily difficult for many of our clients, said Brian Storms, Chairman and Chief Executive Officer of Marsh. The capacity MaRI provides could only be produced by a firm with deep intellectual capital, an integrated approach, and excellent industry relationships as evidenced by our important collaboration with a highly-rated carrier like ACE.

In some regions of the U.S., property catastrophe insurance rates have quadrupled since the 2005 U.S. hurricane season. Marsh expects the ACE / MaRI program to deliver $400 million in extra capacity to its clients during the next three months. Depending upon client demand, market conditions, and other factors, Marsh believes this approach could provide more than $1 billion in total extra capacity over the next year.

"The diversity and composition of Marsh's extensive portfolio of clients allowed us to create an attractive opportunity for investors, but more importantly, a great option for our clients," said Philip V. Moyles, Jr., Executive Vice President of Marsh. "This is a case where we used both our intellectual capital and market presence to deliver the kind of solution large corporate clients have historically grown to expect from Marsh."

MaRI joins a proud lineage of important innovations Marsh has brought to the insurance market, dating back to the creations of ACE and XL in the mid-1980s, Mid-Ocean Re in the 1990s, and AXIS Specialty Ltd. in 2001.

In addition to the direct access it provides investors to the catastrophe risk component of large U.S. commercial property policies, MaRI includes several other important innovations over previous sidecar structures, said Ken Pierce, an Executive Director in Morgan Stanleys Insurance Products Group responsible for sidecars and the MaRI transaction.

Investors in MaRI include affiliates of Lehman Brothers, Marsh & McLennan Risk Capital Holdings and several funds with expertise in insurance and risk-linked securities.

About Marsh

Marsh, the world's leading risk and insurance services firm, has 26,000 employees and annual revenues approaching $5 billion. The firm provides advice and transactional capabilities to clients in over 100 countries. Marsh is a unit of Marsh & McLennan Companies (MMC), a global professional services firm with approximately 55,000 employees and approximately $12 billion of annual revenues. MMC also is the parent company of Guy Carpenter, Kroll, Putnam Investments, and Mercer. MMCs stock (ticker symbol: MMC) is listed on the New York, Chicago, Pacific, and London stock exchanges. MMCs Web Site is www.mmc.com. Marshs Web site is www.marsh.com.

About ACE

ACE USA is the U.S.-based retail operating division of the ACE Group of Companies, headed by ACE Limited (NYSE: ACE) and is rated A+ (Superior) by A.M. Best Company and A+ (Strong) by Standard & Poors. ACE USA, through its underwriting companies, provides insurance products and services throughout the U.S. Additional information on ACE USA and its products and services can be found on www.ace-ina.com. The ACE Group of Companies provides insurance and reinsurance for a diverse group of clients around the world.

About Morgan Stanley

Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management, wealth management and credit services. The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 600 offices in 30 countries. For further information about Morgan Stanley, please visit www.morganstanley.com.

Forward Looking Statements

This press release contains "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995. These statements express management's current views concerning future events or results, and thus are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements include:

  • the economic and reputational impact of: litigation and regulatory proceedings brought by federal and state regulators and law enforcement authorities concerning our insurance brokerage operations (including the complaints relating to market service agreements and other matters filed by, respectively, the New York Attorney General's office in October 2004, the Connecticut Attorney General's office in January 2005 and the Florida Attorney General's office and Department of Financial Services in March 2006); and class actions, derivative actions and individual suits filed by policyholders and shareholders in connection with the foregoing;
  • in light of Marsh's elimination of contingent commission arrangements in late 2004, our ability to achieve profitable revenue growth in our risk and insurance services segment by providing both traditional insurance brokerage services and additional risk advisory services;
  • our ability to retain existing clients and attract new business, and our ability to retain key employees;
  • period-to-period revenue fluctuations relating to the net effect of new and lost business production and the timing of policy inception dates;
  • the impact on commission revenues of changes in the availability of, and the premiums insurance carriers charge for, insurance and reinsurance products, including the impact on premiums attributable to catastrophic events such as hurricanes;
  • the impact on renewals of pricing trends in particular insurance markets, fluctuations in the general level of economic activity and decisions by insureds with respect to the level of risk they will self-insure;
  • our ability to implement our restructuring initiatives and otherwise reduce or control expenses and achieve operating efficiencies;
  • the impact of competition, including with respect to pricing and the emergence of new competitors;
  • our ability to make strategic acquisitions and to integrate, and realize expected synergies, savings or strategic benefits from, the businesses we acquire;
  • our exposure to potential liabilities arising from errors and omissions claims against us;
  • our ability to meet our financing needs by generating cash from operations and accessing external financing sources, including the potential impact of rating agency actions on our cost of financing or ability to borrow;
  • the impact on our operating results of foreign exchange fluctuations; and
  • changes in the tax or accounting treatment of our operations, and the impact of other legislation and regulation in the jurisdictions in which we operate.

The factors identified above are not exhaustive. Marsh operates in a dynamic business environment in which new risks may emerge frequently. Accordingly, Marsh cautions readers not to place undue reliance on its forward-looking statements, which speak only as of the dates on which they are made.

Marsh undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made. Further information concerning Marsh and MMCs other businesses, including information about factors that could materially affect results of operations and financial condition, is contained in MMC's filings with the Securities and Exchange Commission.

* A+ rating by A.M. Best & Co.

Contacts

Media:
Marsh Inc.
Mike Kachel, 212-345-6877
or
Marsh Inc.
Al Modugno, 212-345-2448
or
ACE
Carla Ferrara, 215-640-4744

Contacts

Media:
Marsh Inc.
Mike Kachel, 212-345-6877
or
Marsh Inc.
Al Modugno, 212-345-2448
or
ACE
Carla Ferrara, 215-640-4744