EPL& EPLI Underwriting Trends: Baby Boomers Come of Age

1. EPL& EPLI Underwriting Trends: Baby Boomers Come of Age Panelists: Laura R. Zaroski, Esq. Donohue Brown Mathewson & Smyth LLC Thomas M. Caputo Rockwood Programs Stuart Ishimaru U.S. Equal Opportunity Employment Commission Catherine Padalino Chubb Specialty Insurance Paul Siegel, Esq. Jackson Lewis LLP

2. Why companies don’t buy EPL….and why they should The 2005 Chubb Private Company Risk Survey New York City ~ April 10 & 11, 2006

3. The 2005 Chubb Private Company Survey • Commissioned independent study and interviewed 451 privately held U.S. companies to: • Gain better insight into level of concern about management liability risks • Measures taken to mitigate these exposures • Incidence of events that were triggering litigation • Financial impact of this litigation and other risk events - New York City ~ April 10 & 11, 2006

4. Asked questions around… • Management liability risks involving: • Directors & Officers Liability • Employment Practices Liability • Fiduciary Liability • Crime Insurance • Miscellaneous Professional Liability • Workplace Violence • Kidnap/Ransom & Extortion

5. 2005 Chubb Private Company Risk Survey • 67% of companies likely to broaden their product offerings. • 20% plan to reduce or eliminate some employee benefits. • 21% plan to reduce their workforce.

6. Employment Practices Findings New York City ~ April 10 & 11, 2006

7. EPL lawsuits are common 35% Companiesexperiencing an EPL charge or lawsuit in the past five years *According to the 2005 Chubb Private Company Risk Survey

8. Small businesses have been sued 44% Companies with 50 to 249 employees experiencing an EPL charge or lawsuit in the past five years * According to the 2005 Chubb Private Company Risk Survey

9. Employment Practices Findings • 34% reported costs ranging from $11,000 to $300,000. • The average cost for this group was: $74,400 * According to the 2005 Chubb Private Company Risk Survey

10. Reductions in force and outsourcing plans continue… Percent planning to reduce work force in the year ahead: Size of Company25-49 employees50-249 employees 19% 22% Percent planning to outsource functions/operations in the year ahead: Size of Company25-49 employees50-249 employees 27% 33% * According to the 2005 Chubb Private Company Risk Survey

11. Employment Practices Findings • 90% have a written policy banning employment discrimination and sexual harassment • 73% have human resources policies, procedures, and training programs to help prevent losses • 64% provide employment discrimination and/or sexual harassment training.

12. Are companies financially prepared? Executives concerned about the financial impact of an EPL lawsuit: Size of Company25-49 employees50-249 employees 31% 51% * According to the 2005 Chubb Private Company Risk Survey

13. Are companies financially prepared? Do not purchase EPLI: Size of Company25-49 employees50-249 employees 81% 54% * According to the 2005 Chubb Private Company Risk Survey

14. Executives may be more at risk than they realize • An EPL lawsuit can result in significant financial loss. • Executives may mistakenly believe their company has insurance coverage elsewhere. • Litigation against “deep pockets” is commonly seen as means to correct perceived wrongs.

15. EPL 2006: Market Update and Outlook • 2005 “Year of the Class Action” • Headlines Continue • Recent Data from EEOC and JVR

16. Current Economic Impacts • Significant merger & acquisition activity, which often results in layoffs • Expense driven downsizing and outsourcing • Displaced workers looking for evidence of adverse discriminatory impacts • We expect a possible surge in age and race discrimination claims

17. EPL 2006: Hot Topics • Wage and Hour • Panel Counsel issues • Pending and Prior Litigation