Edition 5
December 2004

Contents

	Choosing the Best Insurance Carrier for Your Multinational Clients
	The SMART Approach

	Chubb Enhances LPL Coverage
	Chubb Survey Shows Private Company Risks Often Go Uncovered

Making a Case for Insuring to Value

Archive
	Edition 1: September 2003
	Edition 2: December 2003
	Edition 3: March 2004
	Edition 4: August 2004

Choosing the Best Insurance Carrier for Your Multinational Clients

The numbers are impressive — multinational trade now accounts for one-third of the U.S. Gross Domestic Product, and, from the '90's forward, the number of small- and medium-sized U.S. firms that export goods has more than doubled.

Global markets offer great opportunities for growing companies. However, they also carry risks that make choosing the best multinational insurance carrier particularly important.

There are four key things to consider when you evaluate multinational insurance carriers:

1. Global Underwriting Expertise A multinational insurance carrier should know world markets inside out — from environmental impairment liability coverage in Germany to admitted insurance requirements in China — and stay informed of political and economic developments that would indicate the need for new or updated coverages.
Chubb’s network of wholly owned offices around the world is staffed with dedicated multinational employees who can provide state-of-the-art protection and consistent, reliable services. Local Chubb underwriters and claim professionals help manage the complex legal, linguistic and unforeseen issues that can arise in another country.

2. Specialized Products Look for a multinational insurance carrier that offers a wide array of insurance products specially designed to provide broad and responsive insurance protection against foreign risks. One thing to consider is a “controlled master program” that includes both admitted and non-admitted coverages. With a controlled master program, core coverages are included under an admitted insurance policy, and a difference in conditions and/or difference in limits policy fills in gaps to ensure that a company has the same broad protection worldwide as it is accustomed to for U.S. exposures.
Chubb offers world-class insurance solutions unavailable elsewhere, including our controlled master program, exporters package policy, political risk insurance and trade credit insurance.

3. Global Service Network Select a multinational insurance carrier with an extensive global network of experienced service providers. Consider:
• Number and location of global owned and affiliate offices
• Locally available loss control expertise and claims service
• Procedures for handling losses outside of the United States
Chubb maintains local offices in 28 countries, staffed with underwriting, claims and loss control personnel. To further extend our global reach, we have established formal relationships with local insurance companies in countries where we do not have owned offices. These affiliate companies are located in more than 100 countries, allowing us to provide insurance protection to your clients nearly anywhere in the world they are doing business.

4. Global Financial Strength A multinational insurance carrier should have the financial strength to make good on its promise to pay — and be able to show a track record in handling claims promptly and fairly. Independent rating agencies such as A.M. Best’s, Standard & Poor’s and Moodys can help you assess an insurance carrier’s financial strength.
Chubb consistently earns high ratings by A.M. Best for financial stability and by Standard & Poor’s and Moodys for claims-paying ability.

Business across borders is a fact of commercial life and will only grow in the future. To succeed, you need to select an insurance carrier who can truly perform as your client's international travel partner. With our multinational underwriting expertise, extensive product portfolio, global service network and long-standing financial strength, Chubb is just such a partner.

The SMART Approach
Create customized new and renewal E&O applications online.

You wanted an easier, more streamlined Information and Network Technology E&O application process – and Chubb has created it. Our new SMART Application by Chubb allows you and your INT customers to create, complete, submit and track customized applications online 24/7.

The SMART Application is fast, user-friendly and flexible. First, it asks only for information pertinent to the business operations of your clients – no need to answer irrelevant questions. As an example, for a typical pre-packaged software risk, the SMART Application reduces by more than 50% the number of questions in our traditional application. Second, the SMART Application enables you and your clients to communicate with each other securely (via our protected Web site, @chubb) in real time – facilitating updates, changes and edits without telephone tag, faxing or inbox overload.

Clients can share information and be confident that the SMART Application is tracking each application transaction and maintaining a current version until the complete application is submitted. The SMART Application even allows you to download and print applications to MSWord and PDF format and electronically forward Chubb marketing and SMART Application training materials.

Third, because this technology helps Chubb realize a cost savings, a 5% credit on Chubb's E&O policy premium is available for information and network technology companies that use the SMART Application jointly with an agent or broker.

Put the power of our SMART application to work for you and your information and network technology clients. Contact your local Chubb technology underwriter today.

For more information on the SMART Application, view the features and benefits fact sheet.

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Chubb Enhances LPL Coverage

Law firms need an insurer with the experience required to provide in-depth professional liability insurance protection. This is exactly what Chubb offers through its new ChubbPro Lawyers Professional Liability^SM insurance product.

Chubb already helps protect hundreds of law firms, including many of the world’s most prestigious firms. Now our ChubbPro LPL coverage is better than ever.

Our new ChubbPro LPL policy offers the following coverage enhancements to our former LPL policy:
• Claims made, not made and reported
• Broad definition of professional services
• Broad definition of claim
• Broad definition of wrongful act that relies on an “all risk” approach
• Insured has the right to choose own defense counsel
• Broad definition of insured person
• Broad definition of loss includes punitive damages (where permitted by law)

Why ChubbPro LPL Insurance from Chubb?
• Cost-effective risk-transfer option available—We recognize law firms with excellent loss histories and risk management practices, and we price insurance accordingly.
• Superior service—Our specialists understand the needs of law firms. We make contact within 24 hours of receiving a notice of claim.
• Valuable risk management services—We work closely with our customers to provide valuable risk management tools designed to ward off lawsuits before they can occur.

Chubb seeks law firms with 10 or more attorneys that exhibit stability, good internal financial controls, low employee turnover, primary focus on areas of expertise and a commitment to loss prevention. We employ a conservative approach to firms with more than 300 attorneys and to high-risk practice areas, such as intellectual property, securities, entertainment, financial institutions, plaintiff and class-action litigation.

There often is a significant gap between private company executives’ perceived business risks and the insurance their companies purchase to cover those risks.

The Chubb 2004 Private Company Survey, which surveyed executives at 300 randomly selected privately held companies across the United States, found that:
• 60% of the executives said that an employee is likely to steal funds or equipment from the company during the year ahead, but only 24% said their company purchases crime insurance.
• 55% of the companies plan to reduce their workforce, close a plant, or downsize in the year ahead, yet only 40% buy employment practices liability insurance.
• 46% anticipate making a major acquisition in the year ahead, but only 39% own directors and officers liability insurance.
• 67% plan to reduce employee benefits during the coming year, yet only 24% own fiduciary liability insurance.
• 23% of the executives said it’s likely that someone will try to extort money from the company in the year ahead, yet only 8% buy insurance to cover this risk.
• 42% said their company would probably experience a violent incident in the workplace in the coming year, but only 15% have workplace violence expense coverage.

Chubb designed ForeFront Portfolio^SM, a package of eight insurance coverages, specifically to help privately held companies mitigate these and other exposures.* The package includes coverage sections for:
• Directors and officers liability
• Employment practices liability
• Fiduciary liability
• Crime
• Miscellaneous professional liability
• Kidnap/ransom and extortion
• Workplace violence expense
• Internet liability

New enhancements for small companies: Large private companies (over $1 billion in annual revenue) are more likely to have insurance coverage than smaller companies. However, smaller companies, because of their more limited resources, often face greater risk — just one lawsuit or criminal incident could drive them into bankruptcy. That’s why Chubb has enhanced ForeFront Portfolio to better meet the needs of eligible companies with fewer than 250 employees.

* ForeFront Portfolio for retail producers; Power Source^SM for wholesale brokers.

Making a Case for Insuring to Value

While recent wildfires and hurricanes affect homeowners from coast to coast, the importance of insuring to value has gained national media prominence. As a result, your clients may have significant concerns about ITV and the reasons behind it. When questions arise, you may want to include the following top reasons in your conversations:

• The majority of homes in the United States are underinsured.
Nearly 64% of U.S. homes are underinsured by an average of 27%, with some homes underinsured by as high as 60% (Marshall/Swift Boeckh, Insurance News, June 2004).

• Chubb’s replacement cost figures are developed from local construction costs.
To help ensure that cost estimates for rebuilding and repair reflect today's marketplace, Chubb is in regular contact with approximately 40 local homebuilders, restoration specialists and contractors in each branch territory.

• Many of your customers make home improvements or renovations.
The average homeowner spends at least $5,000 per year on home improvements, and your customers may spend significantly more. About 60% of homeowners fail to notify their insurer and update coverage if they renovate or upgrade, significantly causing the actual replacement cost to increase beyond what is listed on the policy. To ensure proper ITV, remind customers to notify you if they have made substantial home improvements (decorating, additions or upgrades) within the past few years.

• The cost to rebuild custom homes is on the rise.
The materials used to construct custom homes are more expensive than average homes. In fact, the cost of an average home increased 5.5% from 2003 through 2004, with custom and more ornate homes increasing at a higher rate (U.S. Census Bureau). In general, building materials used to construct custom homes are more expensive, due to the higher quality and the inability of the custom homebuilder to buy in large quantity. Plus, fewer contractors specialize in custom construction and historic home renovation, and because of their experience and the demand on this specialty, their rates are usually higher. Statistics that measure national construction averages are not good indicators, since they are skewed by the volume of economy homes built each year.

• Reconstruction costs include more than the building being replaced.
Replacement costs must also include the builder’s profit and overhead, which averages 10-20% of the building costs. An architect’s fee averages 10-15% for new construction or additions and alterations. Decorating fees might be as much as 20% for custom interior design. Extra fees may be included for rebuilding in populated urban areas or in exotic or remote areas (often the location of secondary homes). Also, with reconstruction, there is a need to work with and match existing materials and construction detail that require additional skills and increase the costs.

• In-home appraisals can help estimate a home’s appropriate replacement cost.
Chubb is the only insurer with 230 in-house employees worldwide dedicated to appraising homes through more than 60,000 on-site visits annually. Chubb's complimentary home appraisal service helps the homeowner assess the amount of insurance needed to rebuild the home with similar materials and craftsmanship. Our appraisers have experience in construction methods and pricing, replacement cost valuation methods, and evaluating custom, architecturally unique and older homes. Most competitors do not have “in-house” appraisers, and many estimate replacement cost over the phone or via a computer program, without a physical visit to the home.

• The insurance marketplace is changing.
Many carriers no longer offer “guaranteed” replacement cost options or offer only an additional 25% of Coverage A. Instead, they offer an annual inflation “guard” increase designed to take rising home costs into consideration. However, a yearly increase for inflation may not keep up with the actual increases in construction costs, especially for custom homes. Chubb’s Masterpiece® Deluxe House policy continues to offer an Extended Replacement Cost option, which pays to rebuild a home in a covered loss, even if the cost to do so exceeds the policy limit. Chubb also offers broad Rebuilding to Code coverage. There is no cap on these coverages in most states.

• Chubb helps make the hot media topic of ITV a non-issue.
With Chubb’s in-home appraisal service and exhaustive research into home construction costs, your clients can feel confident that Chubb will help them determine the amount of insurance coverage they need. In addition, placing your customers with Chubb will provide them with access to one of the few carriers still offering an extended replacement cost option.

Following are recent media examples to help strengthen your case.

Homeowners Come Up Short on Insurance, The New York Times, August 31, 2004
Form 02-10-0582

What’s A House Worth, New York Newsday, May 9, 2004
Form 02-10-0580

Lawsuits Seek Homeowners Insurance Changes, San Diego Union-Tribune, April 11, 2004

Gauging Your Home-Insurance Risk, The Wall Street Journal, January 20, 2004.

Insuring to Value, Best’s Review, November 2003
Form 02-10-0562

To order reprints, send a fax to “Chubb Order Entry” at 908.704.6059 and request the appropriate form number.

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For more information, contact your local Chubb office, or e-mail info@chubb.com.

© 2004 Chubb & Son, a division of Federal Insurance Company. All rights reserved.

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