ACE Limited (NYSE:ACE) writes insurance policies including property & casualty and accident & health insurance as well as professional policies like errors & omissions or directors & officers insurance (protecting companies and their employees from the potential liabilities associated with lawsuits from clients, stakeholders, etc.). The company was founded by 34 Fortune 500 companies that were worried about rising premiums and a failure to find takers for some large-risk policies. Thus ACE has a history of insuring largely low-frequency, high-severity risks for institutional customers.^[1]

ACE has diversified in the past decade into sectors such as energy, financials, healthcare, retail, aerospace, and transportation, signaling that the playing field is open for a wide array of potential new business. ACE has focused on maintaining underwriting profitability by insuring risks that are high in severity but low in frequency (e.g. E&O policies, catastrophe insurance, etc.). Such fat tail risks can be very difficult to assess, and often the ultimate day of reckoning can be far in the future, distorting present results and leading to wide fluctuations in year-to-year results.^[2]

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