Question-and-Answer Session
Operator
Thank you Mr. Donovan, the question and answer session will begin at this time. If you’re using a speakerphone, please pick up your handset before pressing any keys on your keypad. Should you have a question, please press star one, that’s star asterisks one on your keypad. If you wish to withdraw your question, if it’s been asked and answered, you can withdraw by pressing star two. So again star one to signal, un-muted. Your question will be taken in the order that it is received, please stand by for your first question. And our first question of the morning comes from Amit Kumar at Fox-Pitt Kelton, please go ahead sir.
Amit Kumar – Fox-Pitt Kelton
Thanks, good morning. Just going back to the $10 million reserve addition from D&O subprime, can you just give some more color on that?
Andy Barnard
Sure Amit, just to give you a little bit of background data. Odyssey Re’s exposure to subprime would largely emanate from our US reinsurance book of business. In that book of business we have approximately $50 million of premium, about 20% of that is financial institution related. That was one data point. To date, we have received, we are aware in terms of the underlying pool of insureds in that reinsurance book of class action suits that have, that would expose to Odyssey up to a maximum of about $50 million of limits for Odyssey. Of that, half, $25 million or so is full coverage D&O and about half is side A coverage. Our average limits with respect to those underlying securities class actions are in the $1.5-$2 million range.
So, we’ve considered all of this information, we’ve taken a look at of course what our normal carrying loss ratios are for the 06 and 07 underwriting year D&O business, that would be around 70%. And of course we do think that that loss [tick] that we still maintain on that book of business would contemplate some level of loss activity emanating from the subprime. And so we’ve chosen to put an extra $10 million on top to provide for additional losses at this point in time. It goes without saying that this whole area and what ultimately will be the cost in the insurance and reinsurance industry is something we will only know after many, many years. And so that’s really where we are at this point in time.
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