TRH Transatlantic Holdings Common Stock

THE EVENT: On April 22, the drilling rig Deepwater Horizon, owned by Transocean Ltd. (RIG) and leased to BP PLC (BP.LN), sank off the coast of Louisiana in the Gulf of Mexico after an explosion and fire onboard the rig. Eleven people died from the event. Efforts to stop the oil spill have so far been unsuccessful. More than 12,000 barrels of oil per day are spilling into the ocean, threatening to cause an environmental catastrophe along the U.S. coastline. If containment efforts fail, the crude will likely continue to flow at least until a relief well is completed in August.

GENERAL IMPACT ON INSURERS: As the oil spill continues, insurance claims are also expected to soar and hit insurance and reinsurance companies that cover different aspects of the disaster-- including marine hull, marine liability, general liability, environmental/pollution liability, business interruption, directors' and officers' liability and workers' compensation.

IMPACT ON LLOYD'S OF LONDON INSURERS: Lloyd's of London insurers are expected to fork out between $300 million and $600 million on claims from the Deepwater Horizon explosion, according to the London market, although the figures remain at an early stage as assessing claims continues.

Some of the larger exposures have fallen at the doors of listed insurers Catlin Group Ltd (CGL.LN), Lancashire Holdings Ltd (LRE.LN) and Chaucer Holdings PLC (CHU.LN) with the former forecasting losses of around $40 million and the other two estimating $25 million of losses each.

ANALYST REACTION:

*Moody's Investors Service said Thursday that total insured losses from this event are currently estimated to be between $1.4 billion and $3.5 billion. "With several parties involved in the drilling work, dozens of class-action lawsuits filed and the ultimate extent of environmental damage unknown, the complexities associated with loss claims are significant and could take many years to be resolved," Moody's said.

*Oriel Securities analyst Thomas Dorner said last week: "The scale of industry loss will lead to significant price increases. Although energy rates declined in early 2010 from peak levels in 2009, this loss evidences that rates are still not high enough to compensate for the risk of loss. In our view, it is likely that midsize oil and gas companies will increase the amount of cover they purchase. Larger players are expected to continue to self insure."

WHAT THE KEY COMPANIES SAY:

*BP: CEO Tony Hayward has tried to play down the effect of the oil spill by saying May 18 that "the overall environmental impact [of the Deepwater Horizon oil spill] will be very, very modest." Recently, he admitted BP wasn't adequately prepared for the crisis, and told the Financial Times: "What is undoubtedly true is that we did not have the tools you would want in your toolkit." BP has tried various methods to plug the oil spill and is currently using robot submarines TO siphon off oil belching from the ruptured wellhead.

*TRANSOCEAN: CEO Steven Newman said May 28 the company will pay a shareholder-approved $1 billion dividend and still meet all of its legal obligations related to the oil spill. "The payment of the dividend will not affect the company's ability to meet its legal obligations," Newman said. More than a dozen U.S. senators, led by Ron Wyden, questioned the dividend payment, saying it may make it more difficult to pursue liability claims against the company.

SHARE REACTION: BP shares have fallen 34% since April 21 to close at 430 pence on Wednesday. Over the same period, Transocean shares have fallen 47% to $48.45 on Tuesday.

DEEPWATER HORIZON LOSS ESTIMATES (Source: Moody's Investor Service):

   COMPANY                                    MIDPOINT OF RANGE OR BEST ESTIMATE 
   Swiss Re                                      $200M 
   Munich Re                                      $80M 
   Partner Re                                     $65M 
   Hannover Re                                    $53M 
   Validus Holdings                               $42M 
   Catlin Group                                   $40M 
   Lancashire Holdings                            $25M 
   Chaucer Holdings                               $25M 
   Montpelier Re Holdings                         $20M 
   Amlin                                          $15M 
   Transatlantic Holdings                         $15M 
   Hiscox                                         $15M 
   RJ Kiln & Co.                                  $10M 
   Beazley                                         $6M 
 

- By Vladimir Guevarra, Dow Jones Newswires. Tel. +44 (0) 2078429486, vladimir.guevarra@dowjones.com

(Rachael Gormley contributed to this item.)