GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | CAPITAL MARKETS SYMPOSIUM ON SECURITIZING INSURANCE RISK SEPTEMBER 2007 Sylvie Durham Shareholder Greenberg Traurig LLP LEGAL AND REGULATORY UPDATE ON INSURANCE RISK SECURITIZATION

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Two Major Types of Insurance Products A. Insurance Company-Sponsored 1.Traditional insurance and reinsurance policies 2.Reg. XXX Reserve Securitizations – monetizes redundant reserves beyond “economic reserves” 3.Block Securitizations -- monetizes future cashflows from insurance and annuity contacts 4.Premium Loan Financing Securitizations – securitizes premium finance loans B. Non-Insurance Company Sponsored 1.Life Settlements 2.Viatical Settlements 3.Increases cash value of insurance policy above cash surrender value

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Legal and Regulatory Issues Legal and Regulatory Environment A.Differs between Insurance – Sponsored and Non- Insurance -Sponsored Products B.Differs among insurance products and securitizations C.Mainly state regulated but increasing federal regulation

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Non-Insurance Company-Sponsored A. Life and Viatical Settlements 1.Stranger Originated Life Insurance (SOLI/STOLI) 2.Prearrangement where applicant intends to sell life policy to third party with no insurable interest 3.Hedge funds and investment banks primary participants B. NY Dept. of Insurance General Counsel Opinion Ruled that life settlement transactions are invalid under NY law because they constitute a “speculative investment” mainly due to the lack of insurable interestsNY Dept. of Insurance General Counsel Opinion

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Non-Insurance-Sponsored (cont’d) C. Viatical Settlements Model Act -- Passed by National Association of Insurance Commissioners (“NAIC”) in April 2007Viatical Settlements Model Act -- Passed by National Association of Insurance Commissioners (“NAIC”) in April Year prohibition instead of two-year warehousing period 2.Licensing Requirements 3.Bond Posting Requirement for Brokers ($250,000+) 4.Full Disclosure of Risk 5.Makes Soli/Stoli deals very difficult 6.Adopted or considering adoption: Ohio

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | D. Florida Hurricane Catastrophe FundFlorida Hurricane Catastrophe Fund 1.Florida adopted revisions to this reinsurance program in Will reduce reinsurance premiums if also enacted by other states 3.Provides insurance for hurricanes at lower cost 4.Reinsures insurance providers if they follow prescribed conditions that cap premiums 5.Discussions for national bill or legislation by other states Non-Insurance-Sponsored (cont’d)

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Insurance-Sponsored A. Offshore Reinsurers NAIC proposal to reduce reserves of offshore reinsurers and unauthorized reinsurersOffshore Reinsurers NAIC proposal to reduce reserves of offshore reinsurers and unauthorized reinsurers 1.Currently offshore reinsurers must post “full gross amount of liabilities” 2.Huge disadvantage for offshore and accredited reinsurers 3.Creates Reinsurance Evaluation Office (REO) in NAIC 4.Proposal would utilize risk-weighted capital measure to reduce reserves for offshore insurers

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Insurance-Sponsored (cont’d) 5.U.S. and accredited insurers would also have to post reserves unless they met certain conditions 6.State insurance regulators, with REO, would evaluate operational and financial operations of reinsurers and issue a rating for each insurer 7.REO would rely on rating agencies in assessment 8.Six rating categories – with best rating category requiring no posting of collateral 9.Difficult to pass through 50 states but there is a proposal in Congress to pre-empt state legislation if not adopted 10.In some states delegation to REO would not be permissible without overhaul of insurance rules

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Insurance-Sponsored (cont’d) 11.Subprime crises and rating agency involvement may doom proposal 12.Onshore and accredited reinsurers also likely to oppose B. EU Reinsurance DirectiveEU Reinsurance Directive 1. Prior to EU Directive, varying regulations a.No regulations for reinsurers in some countries b.Regulate as primary insurers in other c.Registration required in each EU country

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Insurance-Sponsored (cont’d) 2.Under EU Directive, if registered in one country, can do business in other EU countries 3.Contains rules for special purpose vehicles utilized in structured insurance products if SPVs are utilized for reinsurance. UK has done so which would allow SPVs to move onshore 4.Currently, similar solvency margin requirements but under Solvency 2 Project – New risk-based capital rules for Abolishes collateral requirements for offshore reinsurers 6.Goal is convergency with U.S. -- Want elimination of collateral for offshore reinsurers

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Accounting A. Financial Accounting Standards Board (“FASB”) 1.FASB “Accounting for Life Settlement Contracts by Third Party Investors” – provides option for fair value or investment method (cost accumulation)FASB “Accounting for Life Settlement Contracts by Third Party Investors” 2.FASB 157 – “Fair Value Accounting”FASB 157 – “Fair Value Accounting” 3.Insurance – RISK TRANSFER as of September 18, 2007 a.May 26, 2006 Board issued invitations to commentMay 26, 2006 Board issued invitations to comment

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Accounting (cont’d) b.Plans to bifurcate insurance and reinsurance contracts for financial reporting i.Bifurcate into insurance and financing components ii.Similar to FAS 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equities”FAS 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equities” iii.Still receiving comment letters B. International Accounting Standards Board 1.Plans to converge with FASB Accounting 2.IASB Views on Convergence

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Federal Regulation A. Pension Reform Act of 2006Pension Reform Act of Impacts life settlements securitizations 2.Imposes reporting requirements to IRS for any tax- exempt organization 3.Authorizes study by Department of Treasury in Charity-Owned Life Insurance B. National Catastrophe Plan 1.House is examining federal reinsurance provided under National Flood Insurance Program to cover all natural perilsHouse is examining federal reinsurance provided under National Flood Insurance Program to cover all natural perils

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Federal Regulation (cont’d) 2.Terrorism Risk InsuranceTerrorism Risk Insurance i.Terrorism Risk Insurance Act will be extended ii.Due to expire on December 31, 2007 iii.Proposal to extend for up to 15 years iv.Has support in NAIC C. Further Federal Intervention?

GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | Conclusion ELEPHANT IN THE ROOM Subprime Crises & Credit Market Turmoil 1.Impact on hedge funds 2.Impact on rating agencies 3.Impact on views relating to Insurance Securitization regulations