                       





             


HEIGHTENED EVENT RISK AND THE IMPACT OF HIGH SEVERITY EVENTS





                               





    


Recession


500 1000 1500 2000 2500 3000 3500


0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 BBB BB B CCC





                        


          


                                              


    


 


                                       


            


Exhibit 2: Severe market events have often caused corporate spreads to widen Historical monthly corporate bond spreads (1990-2012)


September 11 attacks


Growth equity bubble peaks


Russia defaults and LTCM collapse


WorldCom defaults


US subprime mortgage crisis


928 bps


611 bps 454 bps 223 bps


2012 Summer 2012 | INTELLIGENT INSURER | 19


Lehman Brothers bankruptcy


Spreads (basis points)


Source: Barclays Capital, March 30, 2012


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