American Re Closes $182 Million Issue of Catastrophe-Related Securities; Plans to Develop Similar Securities or Reinsurance for Clients.

PRINCETON, N.J.--(BUSINESS WIRE)--Dec. 8, 1999--

American Re Securities Corporation recently structured an issue of catastrophe-related securities to help protect the consolidated group led by its parent company, American Re Corporation, from the financial impact of a super catastrophe.

The securities, called Modeled Index Linked Securities(SM) (ModILS)(SM), are different from other forms of catastrophe-related securities in that the protection they provide the (re)insurer is triggered by the size of an index of modeled insurance industry losses from specified types of catastrophic events, not by the actual losses incurred by the (re)insurer. The model which projects the losses is more easily described and understood than a portfolio of actual risk exposures and its results are more easily predicted and verified by investors and rating agencies, thereby theoretically expanding the appeal of the securities to investors and reducing the cost of the protection. The purchase of ModILS(SM) by capital market investors also expands the pool of persons willing and able to assume catastrophe risk beyond the limited group of professional retrocessionaires normally available to (re)insurers.

Details of the Gold Eagle Issue of ModILS(SM)

The ModILS(SM) were issued pursuant to a private placement on November 23, 1999, by a special purpose Bermuda company named Gold Eagle Capital Limited, and are scheduled to mature in April, 2001. There are three different tranches of the securities that collectively provide the American Re Corporation consolidated group with approximately $182 million of potential payments as a result of certain U.S. catastrophes. The largest tranche, the subordinate Class B Floating Rate Modeled Index Linked Notes due April 2001, raised $126.6 million from investors. Investors in the Class B Notes will give up to American Re Capital Markets, Inc., a subsidiary of American Re Corporation, 1/3, 2/3 or 3/3 of their investment if modeled losses from actual events between now and 3/31/01 equal or exceed specified amounts, which vary by the type of event. The actual events can be of three types: California earthquakes, Midwest earthquakes, or Eastern and Gulf Coast windstorms. Another tranche, the senior Class A Floating Rate Modeled Index Linked Notes due April 2001, raised $50.0 million from investors, who will give up all of their investment if modeled losses from the actual events equal or exceed an even larger amount. The final tranche is $5.47 million worth of redeemable Class B preference Shares of Gold Eagle, investors in which will also give up all of their redemption value if the higher amount of modeled losses occurs. Risk Management Solutions, Inc. (RMS) developed and will administer the model that is used to determine the index applicable to each tranche; parametric inputs to the model for the actual events will be primarily publicly available data reported by the U.S. Geological Service (in the case of earthquake) and the National Hurricane Center (in the case of windstorm); and KPMG Bermuda will verify the proper use of the model in the event any investor is required to give up part or all of its investment. Becher & Carlson Management, Ltd., a Bermuda company which is an indirect wholly-owned subsidary of American Re Corporation, will serve as Administrative Agent for Gold Eagle Capital Limited in Bermuda.

Marketplace demand for the three tranches determined the different rates of return on each security. The interest rate on the Class A Notes is 3-month LIBOR plus 2.95%; the interest rate on the Class B Notes is 3-month LIBOR plus 5.40%; and the dividend rate on the Class B Shares is 3-month LIBOR plus 8.00%.

Each tranche of Gold Eagle's ModILS(SM) were rated by one or more rating agencies. The Class A Notes, rated Baa3 by Moody's Investors Services and BBB- by Fitch IBCA, Inc., are believed to be the first catastrophe-related securities with full principal at risk that have been rated investment grade, a reflection of the factors making the offering more attractive to investors. The Class B Notes are rated Ba2 and BB by Moody's and Fitch IBCA, respectively, and the Class B Shares are rated BB+ by Fitch IBCA.

American Re Securities Corporation served as lead placement agent on the offering, with Merrill Lynch & Co. and Salomon Smith Barney acting as co-placement agents.

Availability of ModILS(SM) to American Re Clients

American Re Corporation considers the Gold Eagle ModILS(SM) issue to be an important part of its well-diversified, efficient risk management program, which also includes traditional reinsurance and retrocessions. George T. O'Shaughnessy, Executive Vice President and Chief Financial Officer of American Re Corporation said, "The Gold Eagle ModILS(SM) provided American Re with an additional, cost-effective instrument to protect its results from the impact of catastrophic events. We expect to continue using traditional methods of risk management as well, but having access to ModILS(SM) enlarges the options we now have available." In the future, American Re and its affiliates plan to develop for clients similar securities and/or reinsurance protections. The terms of the securities or reinsurance, including the nature of the triggering loss events and the attachment points, can be customized to address the client's particular needs. Interested clients should contact their usual account executives at American Re, who will involve representatives of American Re Securities Corporation.

EDITOR'S NOTE:

ModILS(SM) is a service mark of American Re and should be identified as such whenever it is used.

American Re, a member of the Munich Re Group, is one of the leading writers of property and casualty reinsurance in the United States. Through its subsidiaries, it provides treaty and facultative reinsurance, insurance, and related services to insurance companies, other large businesses, government agencies, pools and other self-insurers, in the United States and abroad. It has received the highest insurance ratings from A.M. Best, Moody's and Standard & Poor's. The Munich Re Group is the leading reinsurance group in the world. It is headed by Munich Reinsurance Company of Munich, Germany, and includes reinsurance subsidiaries, branches, service companies and liaison offices in more than 60 locations worldwide, serving insurers in more than 150 countries.