Chubb’s Department of Financial Institutions “DFI for DBU” April 7, 2010

Chubb’s Department of Financial Institutions

“DFI for DBU”April 7, 2010

CanChubbQuote@chubb.com

On the Call …

• Tim Usher-Jones

Underwriting Officer, Department of Financial Institutions

Presentation Overview Reasons to Pursue F.I.’s Classification of Financial Institutions The Products Underwriting Criteria Asset Manager Focus Topical Industry Trends and Regulation Questions

CHUBB SPECIALTY INSURANCE (CSI) STRUCTURE

Executive Protection

Department of Financial Institutions

Executive ChubbPro

Why Pursue Financial Institutions?

Growth IndustryCross-Selling OpportunitiesFew CompetitorsDFI Quotes 80% of New

SubmissionsKnowledgeable Partner

Classification of Financial Institutions

1. Depository Institutions• Banks, Finance Companies, Credit Unions, Trust

Companies, Mortgage Companies, Leasing Companies

2. Financial Management Firms• Investment Advisors, Stockbrokers, REITs, Mutual

Funds, Wealth Managers, Venture Capital Firms, Investment Bankers

3. Insurance Providers• Insurance Companies, Reinsurance Companies

4. Service Organizations• Exchanges, Financial Intermediaries, Funds Transfer

Organizations, SRO’s

DFI Product Overview Employee Practices Liability Fidelity Bonds Automobile Boiler & Machinery Kidnap & Ransom Mail Insurance Umbrella & Excess Computer Crime Integrated Risks Alternative Risk CyberSecurity Venture Capital Asset Protection Trust Company E&O Insurance Company Professional Liability Forefront by Chubb for Insurance Co’s Excess Policy Mutual Fund Professional Liability Not For Profit D & O

Directors & Officers Liability Fiduciary Liability General Liability Business Income Errors and Omissions Liability Property Workers’ Compensation Builders Risk Wrap -up Liability Captives Banker’s Professional Liability BrokerEdge Family Office Pak ForeFront By Chubb ForeFront By Chubb For Investment

Advisors

DFI Product Overview Employee Practices Liability Fidelity Bonds Automobile Boiler & Machinery Kidnap & Ransom Mail Insurance Umbrella & Excess Computer Crime Integrated Risks Alternative Risk CyberSecurity

Venture Capital Asset Protection Trust Company E&O Insurance Company Professional Liability Forefront by Chubb for Insurance Co’s Excess Policy Mutual Fund Professional Liability Not For Profit D & O

Directors & Officers Liability Fiduciary Liability

General Liability Business Income

Errors and Omissions Liability Property Workers’ Compensation Builders Risk Wrap -up Liability Captives Banker’s Professional Liability BrokerEdge Family Office Pak ForeFront By Chubb

ForeFront By Chubb For Investment Advisors

DFI Underwriting Criteria

Targeted Financial Institutions must possess the following Targeted Financial Institutions must possess the following characteristics: characteristics:

•Desired nature of OperationsDesired nature of Operations•High quality of management High quality of management •Proven track recordProven track record•Minimum equity of $1MMinimum equity of $1M•Profitable operating historyProfitable operating history•Proven risk management proceduresProven risk management procedures•Favourable Litigation/ Loss HistoryFavourable Litigation/ Loss History

The Opportunity

The business of managing investments is riskier and more complex than ever:

• Varied business models such as Mutual Fund Managers that own distribution, stand-alone Investment Advisory firms and finally Investment funds that are structured as trusts versus corporations

• Outside the Canadian Banks, very few large independent asset managers left, but many small private firms

• Dynamic regulatory environment, increased scrutiny

• National Instrument 81-107 - November 2006 - Independent Review Committee

• National Instrument 31-103 - September 28, 2009 - national registration regime for financial management firms and individuals

The Opportunity (cont’d)

• Rapidly evolving products, structures and distribution channels of the asset management industry

• Mergers and acquisitions activity has meant several mid-sized firms are gone and we are left with a handful of large asset managers that manufacture and distribute investment product

• Global marketplace means clients can be non-Canadian, firms often own subsidiaries in foreign jurisdictions as well as set up off-shore funds

Asset management firms and their investment funds need proven insurance coverage that can easily adapt.

ForeFront for Investment Advisors

Insuring Agreements: Employment Practices Liability Fiduciary Liability Directors and Officers Liability Investment Advisors E & O Liability Outside Directorship Liability

Sources of Loss Include: Statutory Liabilities Wrongful Termination Breach of Fiduciary Duty Breach of Investment Objectives

VCAP (Venture Capital Asset Protection)

Insuring Clauses: Management Liability Coverage (D&O) Management Indemnification Coverage (SIDE A) Errors and Omissions Coverage (E&O)

Sources of Loss Include: Breach of Contract Tortious Interference Oppressive Conduct Breach of Offering Memorandum

CANCAP (Canadian Capital Asset Protection Professional Liability)

E&O Coverage For: Small to Mid-Sized Canadian Financial Institutions that offer a variety

of financial services All directors, officers and employees (past and present) Separate Tower of Insurance for Approved Persons

For claims arising out of Services such as: Fiduciary/Trust Dept Investment Advisor/Fund Mgmt Lending Broker/Dealer Activities Funds Transfer Distribution of Life Insurance and Mutual Fund Products Investment Banking

Minimum Premium/Deductible Thresholds

Line Min Ded Min Prem D&O E&O

Fidelity Bond P&C

Fiduciary EPL K&R Mail

$50,000 $50,000 $5,000 $1,000

$10,000 $10,000

Nil Nil

$5,000 $10,000 $1,250 $5,000 $5,000 $5,000 $2,000 $2,500

Product Highlight: AMP

Asset Management ProtectorSM by Chubb

Asset Managers need insurance that is:

Designed for their industry Customizable to how they want to structure their

insurance coverage Flexible enough to respond to their individual business

model Able to address numerous combinations of asset

management structures and their foreign equivalents Easily and seamlessly adaptable to operational changes

during the policy period Easy to work with and easy to understand Backed by a strong carrier with claims expertise in their

industry

Target Markets Registered Investment Advisors Portfolio Managers Fund managers/sponsors Mutual Funds Pooled Funds Private Funds/Hedge Funds Investment companies and funds domiciled

outside Canada.

The Coverage SolutionA flexible, modular liability insurance policy that helps protect firms and funds from their most critical professional and management liability exposures:

•Professional Liability (Errors and Omissions Liability)

•Directors and Officers (D&O) Liability

•Employment Practices Liability

•Fiduciary Liability

Coverage: Broad Definition of Professional Services

In Professional Liability Coverage Part, definition includes:• In addition to investment advisory and management

services, asset allocation services; fiduciary capacity as respects third party plans; selection of outside managers and service providers; publication of written material

Insuring clauses include vicarious liability

Coverage: Independent Review Committee (IRC) – NI 81-107

Automatic $1,000,000 additional dedicated excess limit for Independent Review Committee (IRC) members, with option to purchase further additional limit.

Typical Claim Scenarios Claims by clients for breaches of investment guidelines Prospectus liability claims against mutual fund directors,

advisers, and service providers Formal regulatory investigations into alleged trading

violations Claims alleging failure to disclose risks or conflicts of

interest Claims for failure to perform due diligence in the selection

and oversight of sub-advisers or outside funds Improper valuation of fund assets

Asset Manager Relevant Regulations

National Instrument 31-103

NI 31-103 Categories of Registration

Three general categories;1. Dealers

• Investment (IIROC), Mutual Fund (MFDA), Scholarship Plan, Exempt Market, & Restricted Dealers

2. Portfolio Manager (Adviser)3. Investment Fund Managers

Insurance RequirementsInvestment Dealers $500K or $200K for Type 1 (IIROC-400.4)

Mutual Fund Dealers $50K per Approved Person up to $200K, $500K for Level 4 (MFDA Rule 4.4)

Scholarship Plan, Exempt Market, and Restricted Dealers

$50K per employee up to $200K

Portfolio Managers $50K no access to client assets or $200K

Investment Fund Managers $200K

• Maximum: Formula based on 1% of total assets or assets under management, up to $25 Million.

• Minimum:

Implementation Timeline September 28, 2009 - Registration

March 28, 2010 – Meet Insurance Requirements

September 28, 2010 – New Categories “Transition” and meet Insurance Requirements: Investment Fund Manager, Exempt Market Dealers and Scholarship Plan Dealers

SolutionThis is an opportunity for client

introduction and to demonstrate knowledge

We can accommodate full $25M limit requests

Chubb is the #1 writer of fidelity bonds in North America (SFAA)

Why Chubb? Unprecedented Claims Philosophy dedicated to

superior claims services Chubb’s DFI team is comprised of more than 145

professionals in 46 branches worldwide Chubb’s superior Financial and Claims Ratings:

• S&P- AAA

• Moody’s- Aa1

• A.M. Best- A++

Brand recognition, Insuring asset managers for more than 30 years

Email submissions or questions to:

General questions and enquiries:

1.866.821.6660 Product Information and Applications:www.chubbinsurance.com

How Do I Contact Chubb?

How Do I Submit Business?

1.Send your submission to: CanChubbQuote@chubb.com

2.Specify what coverage(s) you are looking to place.

3.The submission will be reviewed and you will be asked to confirm the following DBU criteria…

What Happens Next?

Negotiations

Underwriter Analysis & Review

Underwriter Assigned to risk

Broker confirmsDBU Criteria

Submission Reviewed

SubmissionSent to Inbox

CHUBB INSURANCE COMPANY OF CANADA

Department of Financial Institutions

CanChubbQuote@chubb.com1.866.821.6660

QUESTIONS?

Chubb’s Department of Financial Institutions “DFI for DBU” April 7, 2010

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