Reserving for Directors’ and Officers’ Liability

1. Reserving for Directors’ and Officers’ Liability Brian Kristiansen Chubb & Son September 9, 2003 The views, information and content expressed herein are those of the author and do not necessarily represent the views of any of the insurers of The Chubb Group of Insurance Companies. Chubb did not participate in and takes no position on the nature, quality or accuracy of such content. The information provided should not be relied upon as legal advice or a definitive statement of the law in any jurisdiction. For such advice, an applicant, insured, listener or reader should consult their own legal counsel.

2. All D&O Claims Are Not Equal • Public D&O versus Private D&O • Disclosure and other severity claims. • Employment claims. • Breach of contract claims.

3. Severity in General • Disclosure • Mergers & acquisitions • Derivative • Anti-trust • Qui tam • Criminal

4. Severity Specifics - Disclosure Claims • Indicia of severity: • Restatements • Section 11 • Large damages • Other Indicators: • SEC investigation. • Institutional investor as lead plaintiff. • Motion to dismiss denied. • Accountants/lawyers/underwriters as defendants.

5. D&O Policy Issues • Primary or excess? • Entity coverage for securities claims? • Co-insurance? • Deductibles. • Overall composition of the D&O book.

6. The Outside World • The number of severity claims • The bursting of the bubble • lower market caps = lower damages • Corporate scandals • Statutory changes: • PSLRA • Sarbanes-Oxley

7. Reserving • Slower case development due to PSLRA. • Information timeliness. • The claim department.