May 31, 2006
VIA EDGAR AND FEDERAL EXPRESS
Mr. Jeffrey P. Riedler
Assistant Director
Securities and Exchange Commission 100 F Street, N.E.
Washington D.C. 20549
Attention: Mr. Zafar Hasan
RE: ALLIED WORLD ASSURANCE HOLDINGS, LTD
AMENDMENT NO. 2 TO REGISTRATION STATEMENT ON FORM S-1
FILE NO. 333-132507
Dear Mr. Riedler:
On behalf of Allied World Assurance Holdings, Ltd (the "Company"),
attached hereto for filing is Amendment No. 2 to the Company's Registration
Statement on Form S-1 (the "Registration Statement"), which has been marked to
show the changes made from Amendment No. 1 to the Registration Statement filed
on May 5, 2006. Set forth below are the Company's responses to the comments of
the staff (the "Staff") of the Securities and Exchange Commission (the
"Commission") contained in your letter, dated May 23, 2006, to Mr. Wesley
Dupont, Esq. Page numbers referred to in our responses refer to page numbers in
the Amendment No. 2 to the Registration Statement.
Prospectus Summary, p. 1
1. COMMENT. We noted your response to prior comment 8. However, it does
not appear that you have made revisions of the type we requested,
other than to the Business Strategy subsection. Accordingly, we are
reissuing the comment.
RESPONSE: The disclosure in the Prospectus Summary has been further
revised to comply with the Staff's comment.
2. COMMENT. We note your response to comment 9. However, the
presentation of the risks and weaknesses are not as prominent as the
discussion of your strengths and strategy. Please revise to limit
the discussion of your strengths and strategy to an identification
of the aspects of each or revise the discussion of the risks to
provide more detail.
RESPONSE: The disclosure in the Prospectus Summary has been further
revised to comply with the Staff's comment.
Risk Factors, p. 15
A recent complaint filed.... p. 15
3. COMMENT. Please disclose the amount of damages plaintiff seeks in
the case.
RESPONSE: The disclosure on page 13 has been revised to explain
that no specific damages have been claimed in the case.
Critical Accounting Policies, page 43
Reserve for Losses and Loss Expenses, page 43
4. COMMENT. Refer to your response to comment 28. We note that you
include this information on a net basis. Please revise your
presentation to include this information on a gross basis. Also
where you discuss the impact that a ten point change in the expected
loss ratios used in your calculation on page 46, clarify that this
is a reasonably likely change and include a discussion of why feel
that this is a reasonably likely change.
RESPONSE. The disclosure on page 45 has been revised to include the
requested information on a gross basis. The disclosure on page 47
has been revised to explain why a ten-point change in the expected
loss ratio is a reasonably likely change.
5. COMMENT. In addition to the additional information requested above,
please provide the following information regarding your reserves and
reserving process:
a. Please disclose the amount of IBNR included in your reserve
for loss and loss adjustment expense for each year presented.
In addition please disclose the following:
1. Please disclose your process for calculating the IBNR
reserve. It is our understanding that companies may
calculate this reserve by estimating the ultimate unpaid
liability first and then reducing that amount by
cumulative paid claims and by case reserves, but there
may be other methods as well.
2. Please describe the nature and frequency of your
procedures for determining management's best estimate of
loss reserves on both an annual and interim reporting
basis.
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RESPONSE: A table has been added to page 43 to present the amount
of IBNR included in the reserve for loss and loss expenses for each
year presented. The disclosure on page 43 has been revised to
explain the process for calculating the IBNR reserve. The disclosure
on pages 43-44 has been revised to describe the procedures for
determining management's best estimate of loss reserves.
b. Recorded loss reserves for property and casualty insurers
generally include a provision for uncertainty, when management
determines that existing actuarial methodologies and
assumptions do not adequately provide for ultimate loss
development. Such a provision may be explicit (i.e.
represented by the excess of recorded reserves over actuarial
indications) or implicit in the assumption-setting process. So
that investors can better understand the inherent
uncertainties in your business and degree of conservatism that
you have incorporated in your loss reserve estimates, please
address as part of your discussion of the methodology used,
how you determine the provision for uncertainty.
RESPONSE: The disclosure on pages 46-47 has been revised to describe
how uncertainty is provided for in the recorded loss reserves.
c. Where you identified the key assumptions that may materially
affect the estimate of the reserve for loss and loss
adjustment expenses, please disclose the following:
1. For each of your key assumptions and for your provision
for uncertainty, quantify and explain what caused them
to change historically over the periods presented.
2. Discuss whether and to what extent management has
adjusted each of the key assumptions and the provision
for uncertainty used in calculating the most recent
estimate of the reserve given the historical changes,
current trends observed and/or other factors as
discussed in 1 above. This discussion should reconcile
the historical changes, the current trends and/or other
factors observed to what management has calculated as
its most recent key assumptions.
RESPONSE: The disclosure on page 47 has been revised to comply with
the Staff's comment.
6. COMMENT. Please discuss and quantify the effect that your ceded
reinsurance activities had on financial position, results of
operations, and cash flows for the periods presented. Also discuss
changes you have made to your past reinsurance strategies in
developing your current strategies and the expected effect that
those changes may have on your financial position, results of
operations and cash flows. Describe any limitations on your ability
to cede future losses on a basis consistent with historical results
and their expected effect on financial position, operating
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results and cash flows. Such limitations could relate to changes in
reinsurance market conditions, a restructuring of your reinsurance
treaties or the absence of remaining limits for specific accident
years under existing treaties.
RESPONSE: The disclosure on pages 89-91 has been revised to comply
with the Staff's comment.
Financial Statements - December 31, 2005
General
7. COMMENT. Please update all of the financial statements included in
the filing as required by Rule 3-12 of Regulation S-X.
RESPONSE: The financial statements have been updated to comply with
Rule 3-12 of Regulation S-X.
2. Significant Accounting Policies, page F-8
h) Employee Warrant Compensation Plan, page F-11
8. COMMENT. Refer to your response to comment 40 and 42. Please revise
your document to include a discussion of the changes that will be
made to these plans at the time of the IPO along with any discussion
of the expected accounting impact that these changes will have.
RESPONSE: Disclosure has been added to pages 49-50 to include a
discussion of the changes that will be made to the compensation
plans at the time of the IPO along with a discussion of the expected
accounting impact.
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Should members of the Commission staff have any questions or require any
additional information, they should call the undersigned at (212) 728-8116,
Cristopher Greer at (212) 728-8214 or Steven A. Seidman of this office at (212)
728-8763.
Very truly yours,
/s/ Matthew A. Lux
Matthew A. Lux
cc: Allied World Assurance Holdings, Ltd
The New York Stock Exchange
Wesley D. Dupont, Esq.
Steven A. Seidman, Esq.
Cristopher Greer, Esq.
Lois A. Herzeca, Esq.
Enclosures