Análisis de Secuencias

2.1 Current Belgian regulation

As Article 2 of the law relating to the supervision of insurance undertakings of 9 July 1975, excludes reinsurance undertakings from its scope, reinsurance undertakings are currently not subject to regulations nor supervision of the Belgian Banking, Finance and Insurance Commission (“CBFA”). Reinsurance activities are subject to supervision of CBFA only when the undertaking also has insurance activities. R&Q Reinsurance Company (Belgium) has only reinsurance business in run-off, and therefore is not subject to the supervision of CBFA.

2.2 Future regulation after implementation of Directive 2005/68/EC

The draft bill for transposing Directive 2005/68/EC to Belgian law, in its actual drafting which is still subject to review by the Parliament, should be voted on during December 2007. It is thought likely that the CBFA will take the opportunity of the passing of this new bill to impose a set of regulations and solvability requirements on reinsurance undertakings in run-off and that the Group’s reinsurance activities in Belgium may therefore be regulated.

2.3 La Metropole

La Metropole has ceased to underwrite new business since 1994 and has been in run-off since that time. With respect to its portfolio, La Metropole is still subject to some regulatory requirements under the supervision of the CBFA and has to report to the CBFA in respect of those matters.

3. US regulation

3.1 The business of insurance in the US is subject to the laws and regulations of the various states. Each

state has its own body of insurance laws and regulations, some of which are uniform to all states and some of which are unique to the particular state. Despite some uniformity amongst the states, the laws and regulations are subject to varying interpretations by each state’s regulators and courts. Accordingly, the law of any particular state could differ, perhaps significantly, from that set forth generally herein. Generally, however, the following laws and regulations could affect the Group business.

3.2 State regulation of insurers

Generally speaking, insurance companies domiciled in the US are regulated by insurance authorities in any of the fifty states where such insurance companies are domiciled or where they are licensed or accredited or eligible to conduct an insurance business.

State insurance regulators have broad regulatory powers with respect to various aspects of the insurance business, including the organisation of an insurance company, regulation of insurance holding companies, licensure to transact business, admittance of assets to statutory surplus, regulation of unfair trade and claims practices, establishment of reserve requirements and solvency standards, regulation of investments and dividends, and the rehabilitation and liquidation of insurance

3.3 US insurance holding company regulation

An insurance holding company consists of two or more affiliated entities, one of which is an insurance company.

US insurance companies are subject to the insurance holding company laws of the states where they are domiciled. These laws require the insurance company to register with the state insurance regulators and to furnish organisational, financial and other information concerning relationships with affiliates within the insurance holding company system. Generally, all material transactions among affiliates within the holding company system affecting an US insurer, including intercompany sales, loans, reinsurance agreements, service agreements and dividend payments, must be fair and reasonable and, if material or of a specified category, these transactions may require prior notice and approval or non-disapproval by the insurance regulator.

In particular, insurers are required to file an annual registration statement which includes basic information about the filer and controlling person(s) and financial information as to each, amendments to such filings, and prior notice of certain transactions among affiliated entities. 3.4 Acquisition of control of a US insurance company

Before any entity can acquire control of an insurance company domiciled in any US state by purchase of shares or merger or otherwise, the acquisition of control must be pre-approved by the domiciliary state’s insurance regulator, as well as subsequently approved by any other states where the company is licensed. The insurance regulator will ordinarily consider various factors, including the ability of the insurance company to continue to satisfy the state’s requirements for the authorized lines of insurance, the financial strength of the acquiring person or entity, the competence, integrity and management experience of the applicant, plans for the future operations of the insurer, protection of policy holders and any possible anticompetitive results that may arise from the proposed acquisition of control.

“Control” over a US domiciled insurer is generally presumed to exist if any person directly or indirectly owns, controls, holds with the power to vote, or holds proxies representing 10 per cent. of the voting securities of the US insurer or anyone controlling a US insurer.

These laws may discourage potential acquisition proposals and may delay, deter or prevent a change of control of an insurance company, including transactions, and in particular unsolicited transactions, that some or all of the shareholders of an insurance company might consider to be desirable.

3.5 The National Association of Insurance Commissioners

The National Association of Insurance Commissioners (“NAIC”) is an organization of insurance regulators from the fifty states, the District of Columbia and the five US territories. The NAIC helps regulators protect the interests of insurance consumers through financial and market conduct regulation. Specifically, the NAIC develops uniform financial reporting by insurance companies, data collection, and other regulatory support related to identification of potentially troubled insurers, maintenance of statutory accounting, reporting, and risk based capital formula, financial examination system, regulatory information system, and reinsurance regulation.

The NAIC assists regulators in fulfilling their responsibility to protect the interests of insurance consumers by helping coordinate state market and regulatory functions such as antifraud efforts, consumer complaints, market analysis, producer licensing and regulatory interventions. It further advises and assists insurance regulators upon rate and form regulation, actuarial matters, statistical analysis for all lines of insurance and the credit, quality, and value of insurance investment portfolios. 3.6 Risk Based Capital

Every insurer is required to file with its domiciliary state and the NAIC a report on or before March 1 as to its Risk Based Capital (“RBC”) as defined pursuant to a formula which takes into account asset risk, credit risk, underwriting risk, and other business risks. Failure to maintain sufficient RBC could

result in regulatory action, corrective action or placement of an insurer under regulatory control (see below “Administrative supervision, rehabilitation and insolvency”).

3.7 Unfair competition and practices

Many states prohibit any practice of an insurer which constitutes unfair methods of competition or unfair or deceptive acts or practices. These acts or practices include misrepresentations and false advertising of a policy, unfair discrimination, rebates, improper claim handling and other practices specifically prohibited. A determination that insurer has conducted such practices could result in monetary penalties, the issuance of cease and desist orders from engaging in any such practice, and/or a suspension of or revocation of the insurer’s license if the insurer knew or reasonably should have known it had violated such prohibitions.

3.8 Administrative supervision, rehabilitation and insolvency.

All states provide by law for the protection of the interests of insureds, claimants, creditors, and the public generally through administrative supervision, rehabilitation and/or liquidation of insurers. Generally, an insurer may be subject to administrative supervision, rehabilitation, or liquidation, subject to various limitations, if it appears to the regulator that the insurer’s condition renders continuance of its business hazardous to the public or to its insureds or if the insurer has exceeded its powers, failed to comply with applicable provisions of the insurance law, conducts its business fraudulently, its management is fraudulent or incompetent or its assets are insufficient or is, or likely to become, insolvent. In such circumstances, the regulator at its discretion may (i) place the insurer under administrative supervision which prohibits the insurer from taking certain actions, (ii) place the insurer in rehabilitation by taking possession of the assets of the insurer and administering the same subject to the jurisdiction of a court of competent jurisdiction, or (iii) liquidate the insurer pursuant to the provisions of applicable state law.

3.9 Guarantee funds

Most states provide a mechanism for the payment of claims under certain types of insurance policies to avoid delay in payment and financial loss to claimants or policy holders because of the insolvency of an insurer. Usually, this mechanism is a fund organized and directed by the covered insurers to which categories of insurers belong and which assesses member insurers a percentage of the insurers net direct written premiums for the purposes of the fund.

3.10 Reinsurance

The transaction of reinsurance is generally exempt from US regulation, except for the credit for reinsurance requirements discussed below. In addition to the regulatory requirements imposed by the jurisdictions in which they are licensed, reinsurers are subject to indirect regulatory requirements through the “credit for reinsurance” mechanism imposed by jurisdictions in which they are not licensed but where their cedants are licensed. A cedant which obtains reinsurance from a reinsurer that is licensed, accredited or approved by the jurisdiction or state in which the insurer files statutory financial statements is permitted to reflect in its statutory financial statement a credit in an aggregate amount equal to the liability for unearned premiums and loss as well as adjustment expense reserves ceded to the reinsurer. If a reinsurer is not licensed, accredited, or approved in a given state, such reinsurer will be considered a non-licensed and non-accredited reinsurer and will have to post acceptable collateral as dictated by each state’s credit for reinsurance laws and regulations (such as a letter of credit, trust or other acceptable security arrangement) in order for a cedant to be able to take

The funds contained within the trust account are not ordinarily available to meet ordinary expenses. There is a limited ability for insurers to withdraw funds from the credit for reinsurance lines trust fund other than at the normal quarterly revision periods, provided that the amount to be withdrawn:

(i) is in respect of a specified loss event;

(ii) represents value for liabilities previously reserved in respect of policyholders claiming for this

event;

(iii) cannot be obtained from other US dollar assets held outside the relevant US trust fund.

3.11 Transport, domiciled in the State of Ohio, is involved in the continuing litigation over coverage for

third party environmental and toxic tort liabilities. The company also has a significant, but mature, workers compensation portfolio. The companies were placed into run-off and subsequently purchased by the Company in 2004. Since that time the Company has managed Transport through its US subsidiary Cavell America with its office in Cumberland, Rhode Island. Transport is actively managing its direct and assumed liabilities while aggressively pursuing its reinsurance coverage. The company’s operations are subject to an aggregate stop loss provided by National Indemnity Company.

3.12 R&Q Re (US), domiciled in the Commonwealth of Pennsylvania, is the ultimate successor to ACE

American Reinsurance Company and its predecessors (Cigna Re and INA Re) (“together as AARe”). The Company acquired AARe via stock purchase in July of 2006 and manages the company through its US subsidiary Cavell America with its office in Philadelphia, PA. Claims and reinsurance administration services are provided by Resolute Management Inc. in Philadelphia with Cavell oversight on site and from its main office in Cambridge, Massachusetts. Current operations involve several lines including auto, aviation and marine, workers compensation and casualty – with casualty being the most significant. INA Re and its successor were put into run-off back in the 1990s and had been managed by various entities within the ACE Group until last year.

PART VIII

TERMS AND CONDITIONS OF THE PLACING