Private Company Segment: Crime Loss Trends January 2012

2 Impact of the Economic Crisis Fraud by long-term employees is increasing: Employees who have worked at company – >5 years account for 66% of total losses – >10 years account for 33% of losses Fraud committed by employees acting in collusion has surged from 32% in 2007 to 61% in 2011 Collusion is more difficult to detect due to compromised internal segregation of duties – leads to larger losses Source: KPMG 2011 Report

3 Smaller Companies Are at Greater Risk Weaker internal fraud controls cause greater vulnerability to crime losses 31% of frauds against small businesses (<100 EEs) –Highest rate of any category –Median loss for fraud $155K Private company fraud rate and median loss are higher than for public company –Fraud rate: 42% private vs. 32% public –Median loss: $231,000 private vs. $200,000 public Frauds are nearly twice as likely to be detected by accident in private companies versus public companies –11% private vs. 6.8% public Source: Association of Certified Fraud Examiners (2011)

4 Market Loss Ratios and Premiums Average loss ratio of all Fidelity Bond writers increased each year from 2006 to 2010 Overall average loss ratio of all writers of Fidelity Bonds was 54.2% in 2010 – 50% higher than the 36.2% loss ratio in 2006 The 2009 and 2010 results are far above historical norms Total written premium for all writers decreased 15.26% from 2005 to 2010 Source: Surety & Fidelity Association of America 2010 Annual Report

5 Loss Ratios for 2005 Through 2010 (Surety & Fidelity Association of America)

6 Total Written Premiums for 2005 Through 2010 (Surety & Fidelity Association of America)

7 Companies Are Recognizing the Impact of Fraud 18% of private company executives believe employee theft would cause “the most financial damage to their company” 1 Public and Private organizations lose about 5% of annual revenue to fraud 2 From 2008 to 2009: –Incidents of employee dishonesty increased 55% 2 –Dollar losses increased 49% 2 1. Chubb 2010 Private Company Risk Survey 2. ACFE Report [2009]

8 Chubb Group of Insurance Companies (“Chubb”) is the marketing name used to refer to the insurance subsidiaries of The Chubb Corporation. For a list of these subsidiaries, please visit our website at Actual coverage is subject to the language of the policies as issued. Chubb, Box 1615, Warren, NJ This document is advisory in nature. The information provided should not be relied on as legal or insurance 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 or insurance consultant. No liability is assumed by reason of the information this document contains.