Prepared by: Richard K. Traub Traub Lieberman Straus & Shrewsberry LLP

What is the Government Doing Regulatory Reform Bill Too Big Too Fail – No More Advance Warning System Transparency and Accountability for Exotic Instruments Executive Compensation and Corporate Governance Enforce Regulation Already on the Books New Consumer Financial Protection Watchdog

Modernization of Regulation Current U.S. System – same since 1850’s Regulated by the States (51 jurisdictions) IAIS (International Association of Insurance Supervisors): Financial and Solvency Corporate Governance Market Conduct No National Level Regulator – How can we be deemed “equivalent” to Solvency. Most Regulated Industry – but Ineffective.

U.S. TORT SCHEME: Were There is Blame, There Will be a Claim Where are the Potential Claims?

Fiduciary Liability ERISA (Employee Retirement Income Security Act) Claims against administrators of pension and other benefit plans. Bad investments including investments with Madoff. Intentionally misleading investors

Directors and Officers Securities Suits Securities Fraud Goldman Sachs Shareholder Suits Corporate Bankruptcies Failed Banks

Errors and Omissions Claims Against Ratings Agencies Moodys Standard & Poor’s Fitch Based on alleged inflated bond rating given to mortgage back securities.

Sub-Prime Mortgage Claims

Sub-Prime Mortgage Facts

Type of Lawsuits Homeowners vs. Lenders Mortgage Lenders vs. Wall Street Bankers Wall Street Bankers vs. Loan Specialists Investors vs. Everyone

Issues Whether lenders and investment banks alerted borrowers to the risks imposed by subprime loans or the securities backed by them, and How much were they legally obliged to disclose?

Litigation Primarily focused on loan origination – BUT The number of cases has quadrupled this year. 43% - class actions 22% - securities cases 22% - Commercial contract disputes 23% - bankruptcy, employment, professional

Anticipated Suits v. Every Participant in the Process Mortgage Bankers and Loan Correspondents Mortgage Brokers Lenders Appraisers Title Companies Underwriting Firms Bond Insurers Money Managers Public Accounting Firms D & O’s Lawyers Real Estate Brokers - Fiduciary

E & O Insurance Claims v. Hedge Funds Failure to disclose investment fund’s risk and exposure to toxic assets. Bear Stearn’s Citigroup UBS v. Global, Inc.

CGL Coverage Housing Discrimination Claims Targeting minorities with predatory lending practices. Foreclosure Nuisance Claims Cleveland v. mortgage lenders claiming that foreclosure practices have led a public nuisance (blighted neighborhoods).

Employer Liability Coverage Claims by Laid off Employees Discrimination complaints

Key Threats to Insurers Soft Market and Recession Price Erosion Overreaching Regulation Shortage of Capital Exploitation of Insurance as a Wealth Distribution Mechanism Nationalization of Insurance System CAT risks TARP money Emerging Tort Threat and Reversal of Tort Reform