Obligation Britannia Insurance Group Ltd 6.625% ( XS0237631097 ) en GBP

Société émettrice Britannia Insurance Group Ltd
Prix sur le marché refresh price now   100 %  ▲ 
Pays  Pays-bas
Code ISIN  XS0237631097 ( en GBP )
Coupon 6.625% par an ( paiement annuel )
Echéance 08/12/2030



Prospectus brochure de l'obligation BRIT Insurance Holdings Ltd XS0237631097 en GBP 6.625%, échéance 08/12/2030


Montant Minimal 50 000 GBP
Montant de l'émission 135 002 000 GBP
Prochain Coupon 09/12/2025 ( Dans 185 jours )
Description détaillée BRIT Insurance Holdings plc est une société d'assurance spécialisée dans l'assurance des entreprises, opérant principalement au Royaume-Uni et à l'international, offrant une gamme de produits d'assurance et de réassurance.

L'Obligation émise par Britannia Insurance Group Ltd ( Pays-bas ) , en GBP, avec le code ISIN XS0237631097, paye un coupon de 6.625% par an.
Le paiement des coupons est annuel et la maturité de l'Obligation est le 08/12/2030







Brit Insurance Holdings PLC
RDA9-4.1.1
RDA9-4.1.2
(incorporated in England and Wales with limited liability, registered number 3121594)
RDA9-4.1.4
£150,000,000 6.625 per cent. Subordinated Notes due SNA13-4.1
2030
Issue Price: 99.212 per cent.
Interest on the £150,000,000 6.625 per cent. Subordinated Notes due 2030 (the ``Notes'') of Brit Insurance Holdings PLC
(the ``Issuer'' or ``Brit'') will be payable from and including 9 December 2005 to but excluding 9 December 2020 at the rate of
6.625 per cent. per annum, annually in arrear. From (and including) 9 December 2020, the Notes will bear interest at the rate
per annum as described in ``Terms and Conditions of the Notes -- 6. Interest Payments''. Interest Payments (as defined in the
Terms and Conditions of the Notes) may be deferred at the option of the Issuer on any Optional Interest Payment Date as
described in ``Terms and Conditions of the Notes -- 4. Deferral of Interest''.
Payments in respect of the Notes will be made without deduction for, or on account of, taxes of the United Kingdom,
unless such deduction is required by law. In the event that any such deduction is made, the Notes will be subject to grossing up
by the Issuer, subject to certain exceptions as are more fully described under ``Terms and Conditions of the Notes -- 10.
Taxation''.
Subject to giving at least six months' prior written notice to the Financial Services Authority (the ``FSA'') (or such shorter
period of notice as the FSA may accept and, in any event, provided that such notice is required to be given), the Notes will be
redeemable (at the option of the Issuer) in whole but not in part at their principal amount on 9 December 2020, together with
any accrued but unpaid interest to (but excluding) such date and all Arrears of Interest (as defined herein) (if any). In addition,
subject to giving at least six months' prior written notice to the FSA (or such shorter period of notice as the FSA may accept and,
in any event, provided that such notice is required to be given) upon the occurrence of a Tax Event or a Capital Disqualification
Event (each as defined in the Terms and Conditions of the Notes), the Notes may be redeemed, at the option of the Issuer and at,
in the case of a Tax Event, their principal amount or, in the case of a Capital Disqualification Event, the Make Whole Redemption
Price, together in each case with any accrued but unpaid interest to (but excluding) the date of redemption and all Arrears of
Interest (if any) and as otherwise more particularly described in ``Terms and Conditions of the Notes -- 7. Redemption or
Purchase''. Unless previously redeemed, purchased or cancelled, the Notes will be redeemed on 9 December 2030 (the ``Maturity
Date'') at their principal amount, together with any accrued but unpaid interest to (but excluding) the Maturity Date and all
Arrears of Interest (if any).
The Notes will be unsecured securities of the Issuer and will, in the event of the winding-up of the Issuer, be subordinated
to the claims of all Senior Creditors (as defined in the Terms and Conditions of the Notes).
Prospective investors should have regard to the factors described under the section headed ``Risk Factors'' on page 9 of
this Prospectus.
Application has been made to the FSA in its capacity as competent authority under the Financial Services and Markets Act
SNA13-5.1
2000 (the ``UK Listing Authority'') for the Notes to be admitted to the official list of the UK Listing Authority (the ``Official List'') and
to the London Stock Exchange plc (the ``London Stock Exchange'') for the Notes to be admitted to trading on the London Stock
Exchange's Gilt Edged and Fixed Interest Market (the ``Market''). References in this Prospectus to Notes being ``listed'' (and all
related references) shall mean that Notes have been admitted to trading on the Market and have been admitted to the Official
List. The Market is a regulated market for the purposes of the Investment Services Directive 93/22/EC.
The Notes are expected to be assigned on issue a rating of ``BBB'' by Fitch Ratings Limited. A credit rating is not a
SNA13-7.5
recommendation to buy, sell or hold securities and may be subject to revision, suspension, reduction or withdrawal at any time
by the relevant rating organisation.
The Notes will initially be represented by a temporary global note (the ``Temporary Global Note''), without interest coupons,
which will be deposited with a common depositary on behalf of Euroclear Bank S.A./N.V. as operator of the Euroclear System
(``Euroclear'') and Clearstream Banking, socie´te´ anonyme (``Clearstream, Luxembourg'') on or about 9 December 2005 (the
``Closing Date''). The Temporary Global Note will be exchangeable for interests in a permanent global note (the ``Permanent
Global Note''), without interest coupons, not earlier than 40 days after the Closing Date upon certification of non-U.S. beneficial
ownership. The Permanent Global Note will be exchangeable for definitive Notes only in certain limited circumstances, as
described under ``Summary of Provisions Relating to the Notes while in Global Form''.
Joint Lead Managers
Barclays Capital
HSBC
6 December 2005


This Prospectus comprises a prospectus for the purpose of Article 5 of Directive 2003/71/EC (the
SNA13.1.1
``Prospectus Directive'') and for the purpose of giving information with regard to the Issuer and its
SNA13-1.2
RDA9-1.1
subsidiaries which, according to the particular nature of the Issuer and the Notes, is necessary to
RDA9-1.2
enable investors to make an informed assessment of the assets and liabilities, financial position,
profits and losses and prospects of the Issuer.
The Issuer accepts responsibility for the information contained in this Prospectus. To the best of
the knowledge of the Issuer (having taken all reasonable care to ensure that such is the case) the
information contained in this Prospectus is in accordance with the facts and does not omit anything
likely to affect the import of such information.
This Prospectus is to be read in conjunction with all documents which are deemed to be
incorporated herein by reference (see ``Incorporation by Reference'' below).
In this Prospectus, references to ``Brit'' and the ``Issuer'' are to Brit Insurance Holdings PLC, and
references to the ``Brit Insurance Group'' or the ``Group'' are to Brit and its subsidiaries.
In connection with the issue and sale of the Notes, no person is authorised to give any information
or to make any representation not contained in this document and if given or made, such information
or representation must not be relied upon as having been authorised by the Issuer, the Managers (as
defined in ``Subscription and Sale'' below) or the Trustee (as defined in the Terms and Conditions of the
Notes).
This Prospectus is not intended to provide the basis of any credit or other evaluation and should
not be considered as a recommendation by the Issuer or the Managers that any recipient of this
Prospectus should purchase any of the Notes. Each investor contemplating purchasing Notes should
make its own independent investigation of the financial consideration and affairs, and its own
appraisal of the creditworthiness, of the Issuer. This Prospectus may only be used for the purposes for
which it has been published.
No dealer, salesman or other person is authorised to give any information or to make any
representations other than those contained in this Prospectus in connection with the offering or sale
of the Notes and, if given or made, such information or representations must not be relied upon as
having been authorised by the Issuer or the Managers. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication or constitute a
representation that there has been no change in the affairs of the Issuer or the Group since the date
hereof. This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer
or the Managers to subscribe for or purchase, any of the Notes.
The distribution of this Prospectus and the offering of the Notes in certain jurisdictions may be
restricted by law. Neither the Issuer nor any of the Managers represents that this Prospectus may be
lawfully distributed, or that the Notes may be lawfully offered, in compliance with any applicable
registration or other requirements in any such jurisdiction, or pursuant to an exemption available
thereunder, or assumes any responsibility for facilitating any such distribution or offering. In particular,
no action has been taken by the Issuer or the Managers which would permit a public offering of the
Notes or distribution of this Prospectus in any jurisdiction where action for that purpose is required.
Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this Prospectus
nor any advertisement or other offering material may be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with any applicable laws and regulations.
Persons into whose possession this Prospectus comes are required by the Issuer and the Managers to
inform themselves about, and to observe, any applicable restrictions. For a description of certain further
restrictions on the offering, sale and delivery of the Notes and on the distribution of this Prospectus, see
``Subscription and Sale'' below.
The Notes have not been and will not be registered under the U.S. Securities Act of 1933 (the
``Securities Act''), and the Notes are subject to U.S. tax law requirements. Subject to certain
exceptions, Notes may not be offered, sold or delivered within the United States of America (the
``United States'', ``US'' or ``U.S.'') or to U.S. persons.
Unless otherwise specified or the context requires, references in this Prospectus to ``£'', ``sterling''
or ``Sterling'' are to the lawful currency of the United Kingdom of Great Britain and Northern Ireland (the
``UK'' or the ``United Kingdom''); references to ``e'' are to the currency introduced at the start of the third
stage of European Economic and Monetary Union, pursuant to the Treaty establishing the European
2


Community, as amended from time to time; and references to ``US$'' and ``US Dollars'' are to the lawful
currency of the United States of America.
IN CONNECTION WITH THIS ISSUE, BARCLAYS BANK PLC (OR PERSONS ACTING ON BEHALF OF
BARCLAYS BANK PLC) MAY OVER-ALLOT NOTES (PROVIDED THAT THE AGGREGATE PRINCIPAL
AMOUNT OF NOTES ALLOTTED DOES NOT EXCEED 105 PER CENT. OF THE AGGREGATE PRINCIPAL
AMOUNT OF NOTES) OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET
PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL.
HOWEVER, THERE IS NO ASSURANCE THAT BARCLAYS BANK PLC (OR PERSONS ACTING ON BEHALF
OF BARCLAYS BANK PLC) WILL UNDERTAKE STABILISATION ACTION. ANY STABILISATION ACTION
MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE OFFER OF
THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER
THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE AND 60 DAYS AFTER THE DATE OF THE
ALLOTMENT OF THE NOTES.
3


TABLE OF CONTENTS
Page
Incorporation by Reference. . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . .
5
Overview.. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . .
6
Risk Factors . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . .
9
Terms and Conditions of the Notes . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . .
19
Summary of Provisions relating to the Notes while in Global Form. . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . .
33
Use of Proceeds . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . .
35
The Brit Insurance Group . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . .
36
Glossary of Insurance Market Terms . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . .
47
United Kingdom Taxation . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . .
49
Subscription and Sale . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . .
51
General Information . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . .
53
4


INCORPORATION BY REFERENCE
This Prospectus should be read and construed in conjunction with the audited consolidated
RDA9-11.1
annual financial statements of the Issuer for the financial years ended 31 December 2003 and 2004
RDA9-11.2
RDA9-11.4.1
together in each case with the audit report thereon, and the unaudited consolidated financial
RDA9.11.3.3
statements of the Issuer for the six months ended 30 June 2005, which have been previously
published or are published simultaneously with this Prospectus and which have been approved by the
FSA or filed with it. Such documents shall be deemed to be incorporated in, and form part of, this
Prospectus, save that any statement contained in a document which is deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for the purpose of this Prospectus to
the extent that a statement contained herein modifies or supersedes such earlier statement (whether
expressly, by implication or otherwise). Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Prospectus.
Copies of documents deemed to be incorporated by reference in this Prospectus may be obtained
from the specified office of each of the Paying Agents (as defined in the Terms and Conditions of the
Notes) as described in ``General Information'' below.
5


OVERVIEW
The following overview refers to certain provisions of the Terms and Conditions of the Notes and is
qualified by the more detailed information contained elsewhere in this Prospectus. Capitalised terms
used herein have the meaning given to them in ``Terms and Conditions of the Notes''.
Issuer:
Brit Insurance Holdings PLC.
Trustee:
HSBC Trustee (C.I.) Limited.
Issue Size:
£150,000,000
SNA13-4.5
SNA13-4.1
Maturity Date:
9 December 2030
SNA13-4.9
SNA13-4.8
Interest:
The Notes will bear interest at a rate of 6.625 per cent. per annum,
payable annually in arrear, from (and including) 9 December 2005 to
(but excluding) 9 December 2020, and thereafter at the Reset Rate of
Interest, as more fully described under ``Terms and Conditions of the
Notes -- 6. Interest Payments''.
Interest Payment Dates:
Except as described below, interest will be payable on 9 December in
each year, commencing on 9 December 2006.
Ranking:
The Notes and the Coupons will constitute direct, unsecured and
subordinated obligations of the Issuer and will rank pari passu and
without any preference among themselves. In the event of the
winding-up of the Issuer, the payment obligations of the Issuer
under or arising from the Notes and the Coupons shall be
subordinated to the claims of all Senior Creditors but shall rank at
least pari passu with all other obligations of the Issuer which
constitute, or would but for any applicable limitation on the amount
of such capital constitute, Lower Tier 2 Capital and in priority to
those whose claims constitute, or would but for any applicable
limitation on the amount of such capital constitute, Upper Tier 2
Capital or Tier 1 Capital and to the claims of holders of all classes
of share capital of the Issuer.
The sole remedy against the Issuer available to the Trustee or any
Holder for recovery of amounts owing in respect of any sum which
has become due from the Issuer in respect of the Notes will be the
institution of proceedings for the winding-up of the Issuer in
England and Wales and/or proving in any winding-up of the Issuer
and/or claiming in the liquidation of the Issuer.
Interest Deferral:
The Issuer may on any Optional Interest Payment Date defer
payment of interest on the Notes which would otherwise be payable
on such date. Any interest in respect of the Notes not paid on an
Optional Interest Payment Date shall, so long as the same remains
unpaid, constitute ``Arrears of Interest''. Any Arrears of Interest may
be paid in whole or in part at any time, and in any event will
automatically become immediately due and payable in whole upon
the earliest of the following dates:
(i)
the date on which the Issuer or any other person declares or
pays any distribution or dividend or makes any other payment
on any Junior Securities or Parity Securities, save where the
Issuer or such other person is not able to defer, pass or
eliminate or continue to defer, pass or eliminate a dividend or
other distribution or any other payment in accordance with
the terms and conditions of those Junior Securities or Parity
Securities;
(ii)
the date on which the Issuer notifies the Trustee that no
Regulatory Intervention that has occurred is or will be
6


continuing on such date unless the Issuer is otherwise entitled
to defer at such time;
(iii)
the date on which the Issuer commences and does not
abandon a public offer to redeem, purchase or acquire any
Junior Securities or Parity Securities;
(iv) the date on which an order is made or a resolution is passed for
the winding-up of the Issuer (other than a winding-up which
has been approved in writing by the Trustee or by an
Extraordinary Resolution (as defined in the Trust Deed) of the
Holders); or
(v)
the date fixed for any redemption of Notes or the date fixed for
any purchase of Notes by or on behalf of the Issuer.
Any Arrears of Interest will not bear interest.
Optional Redemption:
Subject to giving at least six months' prior written notice to the FSA
(or such shorter period of notice as the FSA may accept and, in any
event, provided that such notice is required to be given), the Notes
will be redeemable on the Reset Date in whole, but not in part, at
the option of the Issuer at a price equal to their principal amount
together with (i) all accrued but unpaid interest to (but excluding)
the date of redemption and (ii) all Arrears of Interest (if any).
Tax Event:
Upon the occurrence of a Tax Event, the Issuer may, subject to giving
at least six months' prior written notice to the FSA (or such shorter
period of notice as the FSA may accept and, in any event, provided
that such notice is required to be given), redeem at any time all, but
not some only, of the Notes at their principal amount, together with
(i) all interest accrued but unpaid to (but excluding) the date of
redemption and (ii) all Arrears of Interest (if any).
A ``Tax Event'' is deemed to have occurred if, as a result of a Tax Law
Change, in making any payments on the Notes, the Issuer has paid or
will or would on the next payment date be required to pay Additional
Amounts on the Notes and the Issuer cannot avoid the foregoing in
connection with the Notes by taking measures reasonably available
to it.
Withholding Tax and
The Issuer will pay such Additional Amounts as may be necessary in
Additional Amounts:
order that the net payment received by each Holder in respect of the
Notes, after withholding for any taxes imposed by tax authorities in
the United Kingdom upon payments made by or on behalf of the
Issuer in respect of the Notes, will equal the amount which would
have been received in the absence of any such withholding taxes,
subject to customary exceptions (see also ``-- Tax Event'' above).
Capital Disqualification Event:
If at any time a Capital Disqualification Event occurs and is
continuing, the Issuer may, subject to giving at least six months'
prior written notice to the FSA (or such shorter period of notice as
the FSA may accept and, in any event, provided that such notice is
required to be given), redeem at any time all, but not some only, of
the Notes at their Make Whole Redemption Price together with any
interest accrued but unpaid to (but excluding) the date of
redemption and all Arrears of Interest (if any).
A ``Capital Disqualification Event'' is deemed to have occurred (1) if
the Notes would not be capable of counting (save where such non-
qualification is only as a result of any applicable limitation on the
amount of such capital) as capital resources satisfying the
Regulatory Capital Requirements (if any) applicable to the Issuer
and/or to all or any part of the Group as a result of any change to
7


the Capital Regulations or the application or official interpretation
thereof; or (2) if, at any time when the Issuer or the Group is
required under any Capital Regulations to have Tier 2 Capital, the
Notes would no longer be eligible to qualify (save as aforesaid) for
inclusion in the Tier 2 Capital of the Issuer or the Group on a
consolidated basis.
Listing:
Application has been made to list the Notes on the Official List and to
admit them to trading on the Market. It is expected that admission to
listing will become effective and dealings are expected to commence
on 12 December 2005.
Governing Law:
The Notes will be governed by, and construed in accordance with,
SNA13-4.3
English law.
Form:
Bearer. The Notes will be represented initially by the Temporary
SNA13-4.4
Global Note which will be deposited with a common depositary for
Clearstream, Luxembourg and Euroclear on or about 9 December
2005. The Temporary Global Note will be exchangeable for interests
in the Permanent Global Note without interest coupons on or after a
date which is expected to be 18 January 2006 upon certification as to
non-U.S.
beneficial
ownership
as
required
by
U.S.
Treasury
regulations and as described in the Temporary Global Note. Save in
limited circumstances, Notes in definitive bearer form with coupons
attached on issue will not be issued in exchange for interests in the
Permanent Global Note.
Rating:
The Notes are expected to be assigned on issue a rating of ``BBB'' by
SNA13-7.5
Fitch Ratings Limited. A credit rating is not a recommendation to
buy, sell or hold securities and may be subject to revision,
suspension, reduction or withdrawal at any time by the assigning
rating agency.
Yield:
6.710 per cent. per annum for the period to the Reset Date.
SNA13-4.10
Risk Factors:
Prospective investors should carefully consider the information under
``Risk Factors'' in conjunction with the other information contained or
incorporated by reference in this document.
Capital Reduction:
Nothing in the Conditions shall prevent the Issuer from undertaking
any reduction or cancellation of the share premium account, or any
capital redemption reserve, of the Issuer which reduction or
cancellation
is the
subject of
a
resolution
passed
by the
shareholders of the Issuer at a general meeting held at any time on
or prior to three years from the date of the Trust Deed and Holders
shall be deemed to have given their consent to any such reduction or
cancellation. In addition, the Trust Deed will provide that the Trustee
shall, without the need to obtain the approval of Holders, give such
approvals and/or consents on behalf of the Holders as may be
required in relation to any such reduction or cancellation and the
Trustee shall not have any liability to Holders or any other person
for so doing.
8


RISK FACTORS
RDA9-3.1
SNA13-2
Considerations relating to the Brit Insurance Group
Group Risks
Investment risk
The capital value of the Group's investments may fall as well as rise and the income derived from
them may fluctuate. A fall in such capital values may result in a reduction in the level of premium
income which the Group may underwrite and/or a reduction in the aggregated value of such
investments may require the contribution of additional shareholder funds.
Underwriting risk
The underwriting of insurance risks is a high risk business. By way of example, the catastrophe
reinsurance and satellite business written by the Group's insurance operations are volatile accounts.
Earnings can vary accordingly and losses may be sustained which would have the effect of reducing
shareholders' funds.
Furthermore, earnings (and the adequacy of the Group's reserves in respect of known and
anticipated liabilities) can be affected by unpredictable events or circumstances. These may include
(but are not limited to) matters such as natural (for example, the 2004 Asian tsunami, US wind
storms such as hurricanes Katrina, Rita and Wilma, earthquakes and Japanese typhoons) or ``man
made'' disasters, the emergence of latent risks, legal developments as well as by changes in legal
precedent (including in relation to the measurement of damages), public policy and fluctuations in
either global insurance capacity or the investment markets. Areas of potential significant exposure to
the industry include (but are not limited to) liability resulting from litigation concerning tobacco usage,
toxic mould, breast implants, repetitive strain injuries and stress-related and similar claims.
Key individuals
The business of the Group may be adversely affected if certain key individuals cease to be
employed by the Group or if their services otherwise cease to be available to the Group.
Credit ratings
The ability of the Group's insurance operations to write certain classes of business, particularly
reinsurance and financial risks, may be affected by a change in the rating issued by an accredited
rating agency.
The Brit Syndicate (as defined in ``The Brit Insurance Group -- Overview'') benefits from the
Lloyd's global credit rating, which could be affected by matters outside of the Group's influence or
control.
BIL (as defined in ``The Brit Insurance Group -- Overview'') utilises credit ratings in order to
conduct its insurance business. If BIL were to experience a significant downwards re-rating from
either of the rating agencies that presently rate it, then BIL may experience a material reduction in the
volume and quality of its business.
Capital reduction
The Group continues to seek ways to manage its capital position and Brit is actively considering a
capital reduction by way of a scheme sanctioned by the High Court in order to create distributable
reserves and maximise its ability to pay dividends. In the event that a capital reduction does take
place (whether by way of a court-sanctioned scheme or otherwise), the funds available to the Issuer
to meet its obligations under the Notes may be reduced.
Holders shall be deemed to have given their consent to any such capital reduction. In addition, the
Trust Deed will provide that the Trustee shall, without the need to obtain the approval of Holders, give
such approvals and/or consents on behalf of the Holders as may be required to any such reduction and
the Trustee shall not have any liability to Holders or any other person for so doing.
Regulation
The Group operates in a highly regulated industry. The principal underwriting companies within
the Group are authorised and regulated either directly by the FSA and/or by the Council of Lloyd's
9


(pursuant to FSA requirements). The ability of BSL and Brit UW (as defined in ``The Brit Insurance Group
-- Overview'') to operate in the Lloyd's market is dependent on their continued authorisation by Lloyd's
and the FSA and the ability of BIL to carry on insurance business is dependent upon its continued
authorisation by the FSA. These authorisations are of fundamental importance to the Group's business
as currently conducted.
The Council has wide discretionary powers to regulate members' underwriting at Lloyd's. It may,
for instance, vary the method by which the solvency ratio is calculated, or the investment criteria
applicable to funds at Lloyd's. Either might affect the amount of the Group's underwriting capacity
and consequently the return on an investment in the Group in a given year of account.
Similarly the FSA has wide regulatory powers, particularly certain powers of intervention. These
include:
.
the power to compel an insurance company to establish reserves to cover future liabilities;
and
.
a wide residual power to require an insurance company to take such action as appears to
the FSA to be appropriate to protect policyholders against the risk that such company may
be unable or unwilling to meet its liabilities.
Regulatory requirements may be changed in a manner that may adversely affect the business of
the Group.
Reinsurance failure
Whilst the Issuer believes that the Group has made prudent provisions in respect of the potential
failure of reinsurers to pay their share of the Group's anticipated reinsurance recoveries, there can be no
guarantee that such provisions will be adequate. The financial failure of one or more reinsurers could
have an adverse effect on the Group's financial position.
Availability and cost of future reinsurance is dependent on prevailing market conditions.
Exchange risks
A substantial proportion of the Group's business is written in currencies other than Sterling, in
particular US Dollars. Whilst the Group seeks to mitigate these risks, it is nonetheless exposed to
changes in exchange rates.
Distribution channels
The Group relies heavily on brokers to distribute and market its products. Brokers are independent
of the Group. No broker is committed to recommend or sell the products of the Group; indeed, they
may sell competing products. Therefore, the Group's relationships with its brokers are important, and
the failure, inability or unwillingness of brokers to introduce clients to the Group could have a significant
effect on the Group's financial performance.
Coverage disputes can increase expenses and incurred losses
There can be no assurance that various provisions of the Group's insurance policy forms and
reinsurance contracts, such as limitations on, or exclusions from, coverage, will be enforceable in the
manner intended. Disputes relating to coverage and choice of legal forum can be expected to arise, as
a result of which the Group may incur losses beyond those that it contemplates incurring pursuant to
its reinsurance contracts or insurance policies.
IFRS volatility
The introduction of International Financial Reporting Standards (``IFRS'') may lead to an increase
in the volatility of results.
Risks resulting from Hurricane Katrina/New Orleans Flood (``NOF'')
Background
Hurricane Katrina first made landfall as a Category 1 storm just north of Miami, Florida on
25 August 2005, then again on 29 August 2005 along the Central Gulf Coast near New Orleans,
Louisiana, as a Category 4 storm. Claims have been caused both by the very high wind speeds
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