1. The Private Paradox- Is Private D&O a “No-Brainer” ? Lisa M. McGee- Moderator Chubb & Son David J. Hensler Hogan & Hartson LLP Brian Inselberg AIG - National Union Paul B. Nowak Alexander, Morford & Woo, Inc Eric Ross Specialty Lines, Beazley Group plc Robert Schueler Travelers Peter M.Trunfio Aon Risk Services, Inc.

2. The Private Paradox Agenda: Private landscape overview Claim and litigation trends Addressing claim trends in the underwriting process Buying trends Questions

3. Private Landscape Overview Private Landscape Overview Define D&O Define D&O Define Private Company Define Private Company Define the Market Define the Market Define the Product Define the Product Define the Evolution Define the Evolution

4. Claim and Litigation Trends Private companies involving a majority or controlling shareholder and minority shareholders present serious risks of D&O exposure especially where there is  a buyout of minority shareholders by majority shareholder (e.g., Level 3 case)  a “freeze out” merger affecting minority shareholders (e.g., FTD case)  a sale of company assets to entities controlled by majority shareholder (e.g., XO Communications litigation)

5. Claim and Litigation Trends Private company bankruptcies or insolvencies also present a high risk of D&O claims – special problems  multiple potential claimants – litigation trustees and creditors as well as shareholders  limited company assets shift focus to potential claims against D&Os  D&Os generally have no corporate indemnification because of the bankruptcy or insolvency

6. Claim and Litigation Trends Family-owned businesses also present serious D&O litigation risks especially whereFamily-owned businesses also present serious D&O litigation risks especially where  certain family–member shareholders are involved in running the business and others are not  certain family members become disaffected for either business or non-business reasons

7. Claim and Litigation Trends Other common claims against private company D&Os include:Other common claims against private company D&Os include:  theft of intellectual property or trade secrets  tortious interference with contract  employee pirating  “going public” claims  antitrust claims

8. Multi product policiesMulti product policies Duty to defend vs optionalDuty to defend vs optional Side A requestsSide A requests SeverabilitySeverability Panel counselPanel counsel Worldwide coverageWorldwide coverage Third party coverageThird party coverage Hammer clause/ settlement clauseHammer clause/ settlement clause Private security coveragePrivate security coverage Risk management servicesRisk management services Coverage Requests Coverage Requests

9. Addressing Claims in the Underwriting Process:  Bankruptcy  M&A  Family  Private Equity

10. Who Buys Private Company D&O? Traditional Buyers Emerging growth / start-up companies Emerging growth / start-up companies Large private companies Large private companies Companies with outside board members Companies with outside board members Companies with a claims history Companies with a claims history New Buyers Family owned companies with outside management teams Family owned companies with outside management teams Employment practices liability buyers Employment practices liability buyers Others Others

11. Typical Non-Buyers Exposures Exposures Quality of the product Quality of the product Value the coverage offers Value the coverage offers Flexibility of the process Flexibility of the process Companies that are unaware of: Companies that are unaware of:

12. Why are Some Non- Buyers Changing Their Minds? Successful ProductSuccessful Product Broader Coverage Broader Coverage Package Policies Package Policies Carriers Carriers ProcessProcess Efficient On-line Response Efficient On-line Response Customized Limit Alternatives Customized Limit Alternatives PricingPricing Agents and brokersAgents and brokers

13. What Can We Do Going Forward? Understand the underwriting appetitesUnderstand the underwriting appetites Continue to refine the processContinue to refine the process Educate the client on the value of duty to defendEducate the client on the value of duty to defend

14. Questions?