Total premiums that we manage on our behalf and on behalf of our co-reinsurers during 2001 consisted of the following:
Effective as of June 30, 2000, we transferred all the assets of our health care segment to 4Sigma. These assets had a book value of $8 million at the time of transfer. In exchange for the transferred assets, we received 8,000,000 shares of Series A preferred stock, representing a 69% equity interest in 4 Sigma. In addition, affiliates of John C Head III, the Chairman of our Board of Directors, invested $3.0 million in cash in exchange for a 28% equity interest in 4Sigma. Dr. Gerald Moeller, a director of ESG from July 1999 to August 2000 and the president of our health care division from July 1999 to June 2000, also invested $400,000 in cash in exchange for a minority equity interest in 4Sigma. The board members of 4Sigma include John C Head III, Dr. Gerald Moeller and Dr. Herbert Palmberger, who also serve as outside counsel to ESG in Germany.
The operating expense ratios for the years ended December 31, 2000 and 1999 were calculated by expressing total administrative expenses net of corporate office expense, as a percentage of net premiums earned. Included in the 2000 administrative expenses is an $8.4 million legal reserve for the expected costs associated with resolving disputes in respect of certain risks that we ceded to and in some cases rescinded.
The distribution of gross premiums written by line of business for the years ended December 31, 2000 and 1999 is as follows:
Prepaid reinsurance premiums decreased from $5.4 million as at December 31, 2000 to $1.5 million as at December 31, 2001, a factor of lower premium writings. During the year, we retroceded 15.5% of our gross written premiums to reinsurers compared to 13.6% in 2000. We have maintained similar levels of excess of loss protection in 2001 as in 2000.
As of December 31, 2001, we had the following material commitments for operating leases and employment contracts:
Certain statements and information included in this Form 10-K constitute "forward-looking statements" within the meaning of the Private Litigation Reform Act of 1995. These statements express our intentions, strategies, or predictions for the future. In addition, from time to time, we may make forward-looking statements, orally or in writing. Forward-looking statements in this Form 10-K include, among others, statements regarding:
These forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from the results expressed or implied by the forward-looking statements. These factors include, among other things:
•Insurance Industry Volatility. The September 11, 2001, terrorist attacks in the United States (and their aftermath) may increase volatility in insurance and reinsurance markets. That volatility could adversely affect market participants, like ESG, whose direct exposure to the terrorist attacks is limited.
•Competitive Pricing Practices. Competitors may seek to capture market share by selling services and products at prices that fall below levels that ESG management expects to be profitable. If a competitor employs this strategy in any of the markets in which we operate, we could lose many customers and be forced to exit the market.
We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent, written and oral, forward-looking statements attributable to ESG or persons acting on our behalf are qualified by the cautionary statements in this Form 10-K.
We estimate and recognize premiums written at the inception of the reinsurance contract based upon information received from intermediaries and ceding companies. We compare estimated written premiums to actual premiums as reported by ceding companies on a periodic basis. The timeliness and frequency of ceding company reports vary considerably by ceding company, line of business and geographic area, therefore the actual ultimate premium written may not be known with certainty for prolonged periods, following the expiration of the reinsurance contract. Differences between such estimates and actual amounts as reported by ceding companies are recorded in the period in which the actual amounts are determined.
Under the Bermuda Insurance Act, 1978, amendments thereto and Related Regulations, European Specialty Reinsurance (Bermuda) Limited is required to maintain certain measures of solvency and liquidity. For the years ended December 31, 2001 and 2000, these requirements have been met. The statutory capital and surplus of European Specialty Reinsurance (Bermuda) Limited was $68.6 million and $76.6 million and the minimum required statutory capital and surplus was $8.1 million and $8.5 million as of December 31, 2001 and 2000, respectively. The minimum required level of liquid assets was $63.2 million and $80.1 million with actual liquid assets of $95.6 million and $143.7 million as of December 31, 2001 and 2000, respectively.
Under the regulations in force in Ireland, Accent is required to maintain a minimum solvency margin. As at December 31, 2001, and 2000, the minimum solvency requirement was $1.7 million and $2.2 million respectively. In addition, the company is required to maintain a trust account of $20 million.