ACE USA Power Products Launches Second-Generation PowerBacker System Protection.

PHILADELPHIA--(BUSINESS WIRE)--July 12, 1999--

Coordinated Capacity of ACE, XL Energy, & Swiss Re 

Provides Limits Up to $100 Million On Replacement Power

Coverage For Investor-Owned Utilities

ACE USA Power Products recently launched its second-generation PowerBacker(SM) insurance product, PowerBacker(SM) System Protection.

The new product is designed to provide higher limits of coverage - up to $100 million - to protect against simultaneous unplanned outages or derates among the power units of large, investor-owned utilities and other large power generation owners.

"Since launching PowerBacker(SM) Price Protection last year, we've been approached by several large investor-owned utilities needing large blocks of insurance capacity to protect against the enterprise-wide risk of a number of their units going down simultaneously," said Ed Zaccaria, senior vice president - Power Products. "As a result, we developed a new product to service such `mega-customers' with the combined capacity of ACE USA, other ACE Group companies, XL, and Swiss Re. Through a coordinated initiative with these world-class reinsurance partners, we have the capacity to protect up to $100 million in exposure, enough for most large power systems."

Industry interest in the new higher-limits coverage has been strong, according to Zaccaria, with FirstEnergy Corp. (NYSE:FE) among the first utilities to purchase the product to protect its system.

ACE USA's reinsurance partners, recognizing the potential in this emerging insurance market, have agreed to back the PowerBacker System Protection product.

"We're excited about supporting this unique and innovative use of insurance to protect the risks inherent in a deregulated energy industry," said Dominic Frederico, who became chairman, president and CEO of ACE INA Holdings, Inc. last week when ACE Limited (NYSE:ACL) acquired the property-casualty operations of CIGNA Corporation. "Even before our agreement of sale was announced in January," Frederico added, "our ACE Group of Companies had agreed to provide reinsurance capacity to the Power Products business."

Paul Dowden, managing director of XL Energy of Bermuda, a business unit of XL Capital (NYSE:XL) added, "Power Products has led the market for replacement power coverage with their PowerBacker product. And we are excited about partnering with them on this, and the prospect of jointly developing other client-driven insurance solutions in the future."

"Swiss Re is pleased to have worked with ACE USA in the development of this innovative product initiative for large, investor-owned utilities," said Heidi Hutter, Chairman, President and Chief Executive Officer of Swiss Reinsurance America Corporation. "By contributing our know how, expertise and reinsurance capacity we have helped Power Products develop an approach to serving the needs of the large, investor-owned utilities most likely to benefit from the protection against potentially large losses that is offered by the PowerBacker System Protection policy."

The PowerBacker System Protection policy, Zaccaria explained, is designed for large, investor-owned utilities, large municipal, or generation and transmission (G&T) Cooperatives with multiple power generating units. These large customers are interested in avoiding big losses during widespread, volatile conditions.

"Let's say a major utility with a combined generating capacity of 7,000 megawatts has a built-in reserve margin of 500 megawatts during a period of peak demand," said Zaccaria. "That means they have a built-in reserve margin to absorb an outage of up to 500 megawatts. Suppose, though, they had a 1000 megawatt outage during a peak demand. They would need to replace a 500-megawatt shortage on the open market. At a peak daily price of $2,000 per megawatt hour -- the highest we saw last year -- replacement power would cost $16 million a day. Those kinds of losses at more than one unit could add up to tens of millions of dollars very quickly," he explained.

"Our product offers a safety net, by paying the difference between the market price and an agreed-upon insured price level for replacement power," added Zaccaria. "Since this is meant to be enterprise-wide system protection, the coverage begins after the customer has exhausted their reserve margin and an aggregate financial retention."

ACE USA PowerBacker Price Protection was launched publicly last summer as the first insurance approach to protect against the price risks in the deregulated power industry, and now insures more than 20,000 megawatts of generated power in the industry.

"While other financial tools are available," said Zaccaria, "an insurance approach facilitates the transfer of the risks of deregulation in electricity markets, based on actual risk assessment, rather than market mechanisms. The insurance approach also provides a customized solution, rather than a commodity product. You can buy precisely the amount and type of coverage you need for the risks that worry you the most."

For more information about ACE USA Power Products and the new PowerBacker(SM) System Protection product, call: 1-800-356-2827.

ACE USA, headquartered in Philadelphia, is the U.S. insurance operations of ACE INA Holdings, Inc., a U.S.-based unit of ACE Limited (NYSE:ACL). Insurance products and services are sold by operating subsidiaries. The ACE Group of Companies provides insurance and reinsurance for a diverse group of clients around the world.