Subro Gateway Coast Underwriters CG B Group Presentation CRIMS

Subro. Gateway Coast Underwriters CG&B Group Presentation CRIMS MONTREAL 20 Sept. 2005 1

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Losses Hitting Canadian U/WRs • Destruction of clothing in containers in Sri Lanka • • during the Tsunami in S. E. Asia in January 2005 Major loss of cargo of bulk concentrate when the bulk carrier broke up and sank off the coast of Japan Various thefts of entire containers in three different continents Ongoing problems with cargo being discharged in Venezuela New Orleans - Katrina 3

Kevan is an Underwriter • An Underwriter: one who lacks personality to be an Actuary. 4

Kevan is Well Balanced • “We are all born mad some of us remain so”. 5

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Impacting Rate Fluctuation • Regulatory Compliance Regimes such as U. K. Financial • • • Services Authority (FSA) and Sarbanes Oxley (SOX) European Union Commission inquiry about to commence Threat of International Terrorism Following 9/11 revised Catastrophe Models influencing Reinsurance protection More conservative investment strategy The Spitzer factor; impact of changing business models surrounding remuneration 8

OFAC • “The Office of Foreign Assets Control ("OFAC") of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction. OFAC acts under Presidential wartime and national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze foreign assets under US jurisdiction. Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close cooperation with allied governments. ” 9

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Len Notaro Insurance Brokers are premium lovers. 11

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Captives Benefits • Lower insurance costs • Greater claims control • Cash flow benefits • Fronting for reinsurance capacity • Unavailable coverage or cost of cover • Tax minimization and deferral 13

Captives Obstacles • Up front capital commitment • Fees (license, directors, audit, fronting) • Management expenses • Premium taxes • Required expertise • Reinsurance costs • Sarbanes Oxley (SOX) 14

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Jerry Giroux "The definition of a consultant: Someone who borrows your watch, tells you the time and then charges you for the privilege. " 16

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The New Business of Insurance 18

Old Mission Statement 19

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New Mission Statement 22

Operating Model ST P FA ST Tactical FA Profitability D I Distribution Infrastructure Strategic Vision Behavioral Leadership Cultural Guiding Principles Core Values Where is the reference to the customer? 23

Going Forward 2006 • Aggressive Insurance Market • Premium savings used to buy additional limits • Cover and conditions negotiable • Captives and risk retention remain as useful • • alternatives Marine markets to offer broader products Sarbanes-Oxley mandates for improved risk awareness Face to face meeting with underwriters Retro Rating and Swing Programs 24

Captives • Smoothing effect of losses • Cash flow benefits • Unbundling of conventional products • Consolidating global exposures • Reduction of government restrictions 25

Web Based Solutions Logistics Risk Management Industry Issues • Inefficient, paper-based, labor intensive process • Certificate control often in the client’s hands leaving room for errors, omissions and fraud • Inability to access standardized data for risk analysis • High administrative & customer service costs • Submission management • policy & certificate issuance • premium calculation • coverage issues & special case handling • billing & collection • claims management 26

Web Based Solutions Opportunities For Growth • Many shippers continue to book insurance through freight forwarders for convenience and due to lack of known alternatives • Companies and assureds have embraced Internetbased quote, bind and issue applications for home, auto & life policies and the same principles have been successfully applied for Marine Cargo (e. g. Oceanwide. com) • Management of your own data in one environment 27

Web Based Solutions Internet Application Basics • • • Paperless and easy-to-use Accessible using a standard web browser State-of-the-art security and encryption technologies Branded client/partner-facing web sites Integration into client logistics management systems as well as underwriter back-office claims management and accounting systems • ASP vs. deployed solution considerations • Availability and cost of internal IT resources • Experience with on-line application marketing • Speed to market 28

Web Based Solutions Internet Marine Cargo System Functionality • Policy issuance / accessibility • Certificate generation with policy compliance validation & automated referral workflow for special-case shipments • Shipment/storage declarations and premium calculation (Marine, War, Storage, Vessel Penalties and taxes) • First notice of loss entry and claim status reporting • On-line claims file for settling agents, brokers & assureds • Flexible exception-based alerts, emails and reporting • Real-time underwriting control over policy conditions, limits, rates and access • Automated billing, payment and receivables management • Sophisticated data analysis & reporting tools • Detailed audit trail • Clause library and reference table lookups to speed entry 29

Web Based Solutions Benefits for Clients • • • Eliminates paperwork & redundant typing Speeds up certificate preparation & bordereau reporting Enhances workflow efficiency through collaboration between shippers, brokers and underwriters • Eliminates errors – helps prevent/detect fraud • Integration with existing systems offers ultimate ease of use and efficiency while providing complete shipment detail for risk management purposes • Improved risk management offers potential for lower costs 30

Terms of Sale 1. 2. 3. 4. 5. “The Carrier Covers My Losses” “I Export F. O. B. ” “I Import C. I. F. ” “Nothing Will Happen To My Goods” “I Already Have My Own Cargo Policy” 31

Subro. Gateway Applicable Laws • US COGSA • HAGUE RULES • HAGUE-VISBY • HAMBURG RULES • TRUCK TRANSPORT ACT • Q. C. C. (NOTICE) • New CIFFA STC’s 32

Agency Role - Other Clauses • The company does not assume a role as principal by delivering a fixed price quotation or invoice. The customer acknowledges that the difference between the amounts payable to third parties retained to carry out the customer's instructions and the fixed price represents the company's gross profit for its services. 33

Forwarder New Conditions 2005 • When acting as an agent, the Company acts solely on behalf of the Customer in engaging the services of third parties on the usual terms and conditions on which the third parties offer such services for the carriage, storage, packing or handling of any goods, or for any other service in relation to them, thereby establishing a direct contract between the Customer and the provider of such services capable of being enforced by the Customer as principal, whether or not the Customer is identified in the contract. The Company shall on demand by the Customer provide evidence of any contracts made on its behalf. 34

2. “I Export F. O. B. ” At Which Point Does The Insurance Attach? Portions Of The Trip May Be Uninsured Lethal If Combined With Extended Payment Terms Weak Currencies Abound Trade Law And Business Law Seller’s Interest. . . At Minimum 35

INCO TERMS COMPARED 1. FOB Free On Board Seller Buyer Seller’s Cost Buyer’s Cost Seller’s Risk Buyer’s Risk 36

3. “I Import C. I. F. ” This Is As Bad As Exporting F. O. B. What Is “I”? Insurance Cost Is Hidden Where Does Cover Cease? Third Rate Currency? 37

INCO TERMS COMPARED 2. CIF Cost, Insurance, Freight Seller’s Cost Seller’s Risk Buyer’s Cost Buyer’s Risk 38

Rule of Thumb Export C. I. F. And Import F. O. B. 39

INCO TERMS COMPARED 1. FOB Free On Board Seller Buyer Seller’s Cost Buyer’s Cost Seller’s Risk Buyer’s Risk 40

3. “I Import C. I. F. ” This Is As Bad As Exporting F. O. B. What Is “I”? Insurance Cost Is Hidden Where Does Cover Cease? Third Rate Currency? 41

INCO TERMS COMPARED 2. CIF Cost, Insurance, Freight Seller’s Cost Seller’s Risk Buyer’s Cost Buyer’s Risk 42

3 PL &4 PL Why outsource? • Can someone else do it better or cheaper? • Can someone else do it for less than our cost of capital? • Does someone else have a better means of achieving end-to-end visibility? • Do we have the necessary skills to orchestrate a complex supply chain? • Outsource the execution of a process but not its control 43

BPO - Did You Know? • Claims staff “process recovery” early • Improved cash flow • Underwriters write superior risks • Your deductible is recovered • Rates up! Cover cut back! Deductible up! • So what? Now what? Learning culture • Demands on capital – personnel and expertise • Large technology investments • ID goodwill vs. liability • Offer solutions 44

Subro. Gateway Inc. Open the Gate to a Smart Claims and Recovery Solution Subro. Gateway Inc. the choice of your Marine Underwriters! Our Services Include: Abandoned goods FF lien positions Asset Recoveries and Subrogation (no cure-no pay) Collection of bad debt Claims management Assisting your customer Deductible recovery Marketing of salvage Covering your NVOCC position with carriers Education and seminars on Marine Insurance Proud to be a member of CIFFA 45