ARCH CAPITAL GROUP LTD.

for details on our competitors in each of the major segments we operate in. We compete on the basis of product offerings, pricing, terms and conditions, claims servicing and customer relationships. Other factors, such as our proven cycle management skills, our expertise in specialty lines of business and our use of technologies and data analytics are other factors, may differentiate us from our competitors. Any failure by us to effectively compete could adversely affect our financial condition and results of operations. The insurance and reinsurance industry is highly cyclical, and we may at times experience periods characterized by excess underwriting capacity and unfavorable premium rates. Historically, insurers and reinsurers have experienced significant fluctuations in operating results due to competition, frequency of occurrence or severity of catastrophic events, levels of capacity, general economic conditions, inflation, changes in equity, debt and other investment markets, changes in legislation, case law and prevailing concepts of liability and other factors. Demand for reinsurance is influenced significantly by the underwriting results of primary insurers and prevailing general economic conditions. The supply of insurance and reinsurance is related to prevailing prices and levels of surplus capacity that, in turn, may fluctuate in response to changes in rates of return being realized in the insurance and reinsurance industry on both underwriting and investment sides.