August 4, 2003 Mitsui Sumitomo Insurance arranges US$ 100 million Catastrophe Risk Swap with Swiss Re Mitsui Sumitomo Insurance Co. Ltd. (MSI / President:Hiroyuki Uemura) and Swiss Reinsurance Company have materialized a US$ 100 million catastrophe risk swap. This transaction consists of two risk exchanges of US$ 50 million each: Japanese typhoon for North Atlantic hurricane, and Japanese typhoon for European windstorm.   Still overcoming the aftermath of the WTC event and the poorly performing investment markets, the global reinsurance market continues to rigorously reorganize its earnings structure in order to restore profitability. Faced with such market conditions as well as the various business opportunities deriving from it, MSI had strengthened the capital base of its two reinsurance subsidiaries in Bermuda and Dublin last April to expand its assumed book of business as part of its new corporate reinsurance strategy. The MSI Group will continue to execute various comprehensive reinsurance strategies (including such catastrophe risk swap arrangements) to further improve and strengthen its business platform and overall capital efficiency. 1. Summary of the Catastrophe Risk Swap between MSI and Swiss Re Counterparty Swiss Re Type of transaction Exchange of reinsurance (Each party respectively cedes and assumes specific catastrophe reinsurance contract(s) to/from the other party) Ceded from MSI JPY 12 billion of Japanese typhoon risk Assumed by MSI US$ 50 million each of North Atlantic hurricane and European windstorm risk Period Continuous Premium Same amount for both ceded and assumed (Zero-cost transaction)   2. Background Being one of the leading providers of insurance products,MSI offers its clients with a wide variety of coverage, including insurance for natural catastrophe risks such as earthquake and typhoon. In order to ensure its clients may enjoy security by continuously receiving adequate coverage and services even in the event of a large natural catastrophe loss, MSI has always utilized reinsurance to prudently and adequately protect its retained portfolio as well as its financial strength and stability (i.e. solvency). However, even with such proper risk management policies in place, MSI's portfolio remains to be Japanese catastrophe risk dominated, thus forcing the need to purchase vast amounts of reinsurance coverage from the extremely volatile reinsurance market every year to balance and manage this "peak risk". Therefore a more comprehensive combination of both alternative forms of risk management transactions and traditional reinsurance coverage is vitally important to solidly improve the efficiency and costs of managing such peak exposures. Also, MSI continues to vigorously expand its overseas insurance operations, but its size and earnings are still small in comparison to MSI's domestic portfolio. There lies the capability and potential of MSI to write more overseas catastrophe risks in order to further balance and diversify its overall catastrophe risk portfolio on a global basis. 3. Objective This catastrophe risk swap transaction will allow MSI to improve its capital efficiency and the stability of its business platform through the effective and dynamic utilization of alternative natural catastrophe cover arrangements and comprehensive risk diversification. MSI has historically been highly dependant on the reinsurance covers it purchases to manage its domestic peak catastrophe risks. However, through the expansion of the overseas catastrophe risk underwriting operations of its subsidiaries as well as the effective use of long-term risk swap arrangements entered into with highly rated reinsurance companies, MSI plans to gradually reduce its exposure to the various uncertainties and volatility of the open reinsurance market, and create a more stable and firm business structure. Furthermore, due to the size of the domestic catastrophe portfolio being significantly larger than that of the overseas catastrophe portfolio, and also due to the fact that there is little or no correlation between the two portfolios, exchanging such risks allows the effect of risk-diversification to work desirably and helps ,MSI reduce its overall risk amount. In other words, this transaction enables ,MSI to restructure and reduce its risk amount for no additional costs, which in return may be utilized to additionally assume other different type of risks (i.e. seize other earnings opportunities without increasing its overall risk amount) and maximize the company's capital efficiency.   [ Image] (Appendix: What is "Reinsurance"?) Reinsurance is a contractual means of spreading risk (transferring a portion of a risk). An insurer will pay the reinsurer a portion of the premium of the original risk, and in return the reinsurer will assume and be liable for that portion of the risk. Reinsurance is a financial arrangement that is vitally necessary for all insurers worldwide writing various risks both in terms of size and type. It allows insurers to manage and protect their portfolio against large losses and secure a safe and solid operation. End