Chilean Earthquake, European Windstorm Xynthia and Australian hailstorms and floods produce insurance and reinsurance losses

Arch Capital Group expects pre-tax earnings for the 2010 first quarter to be negatively impacted by the effects of the Chilean earthquake in the range of $35m to $50m, net of reinsurance, retrocessions and reinstatement premiums.

This preliminary net loss estimate for the Chilean earthquake is based on projected industry insured losses of $6bn to $8bn.

In addition, the Company announced that it expects pre-tax earnings for the 2010 first quarter to be negatively impacted by the combined effects of European Windstorm Xynthia and the Australian hailstorms and floods in an aggregate amount of less than $15m, net of reinsurance, retrocessions and reinstatement premiums. This preliminary net loss estimate is based on projected industry insured losses of $2bn to $4bn for European Windstorm Xynthia and approximately $1bn for the Australian hailstorms and floods.

The above initial loss estimates are based on currently available information derived from modelling techniques, current industry assessments of exposure, preliminary claims information obtained from the Company’s clients and brokers to date and a review of the Company’s in-force contracts. The Company’s actual losses from these events may vary materially from the estimates due to the inherent uncertainties in making such determinations resulting from several factors, including the preliminary nature of the available information, the potential inaccuracies and inadequacies in the data provided by clients and brokers, the modelling techniques and the application of such techniques, the contingent nature of business interruption exposures, the effects of any resultant demand surge on claims activity and attendant coverage issues. In addition, there is uncertainty regarding total losses for the insurance industry for these events, particularly with respect to the Chilean earthquake. Actual losses may also increase if the Company’s reinsurers fail to meet their obligations to the Company or the reinsurance protections purchased by the Company are exhausted or are otherwise unavailable.

Arch Capital Group, a Bermuda-based company with approximately $4.7bn in capital at the end of 2009, provides insurance and reinsurance on a worldwide basis through its wholly owned subsidiaries.