Annual Report 2005 - Chubb Group of Insurance Companies

Ñnancial strength ratings could adversely aÅect the competitive positions of our insurance operations,
including a possible reduction in demand for our products in certain markets.
Our businesses are heavily regulated, and changes in regulation may reduce our proÑtability and
limit our growth.
Our insurance subsidiaries are subject to extensive regulation and supervision in the jurisdictions
in which they conduct business. This regulation is generally designed to protect the interests of
policyholders, and not necessarily the interests of insurers, their shareholders and other investors. The
regulation relates to authorization for lines of business, capital and surplus requirements, investment
limitations, underwriting limitations, transactions with aÇliates, dividend limitations, changes in
control, premium rates and a variety of other Ñnancial and nonÑnancial components of an insurance
company's business.
Virtually all states in which we operate require us, together with other insurers licensed to do
business in that state, to bear a portion of the loss suÅered by some insureds as the result of impaired or
insolvent insurance companies. In addition, in various states, our insurance subsidiaries must participate
in mandatory arrangements to provide various types of insurance coverage to individuals or other
entities that otherwise are unable to purchase that coverage from private insurers. The eÅect of these
and similar arrangements could reduce our proÑtability in any given period or limit our ability to grow
our business.
In recent years, the state insurance regulatory framework has come under increased scrutiny,
including scrutiny by federal oÇcials, and some state legislatures have considered or enacted laws that
may alter or increase state authority to regulate insurance companies and insurance holding companies.
Further, the NAIC and state insurance regulators are continually reexamining existing laws and
regulations, speciÑcally focusing on modiÑcations to statutory accounting principles, interpretations of
existing laws and the development of new laws and regulations. Any proposed or future legislation or
NAIC initiatives, if adopted, may be more restrictive on our ability to conduct business than current
regulatory requirements or may result in higher costs.
The property and casualty insurance industry is the subject of a number of investigations by state
and federal authorities in the U.S., as well as by regulators in jurisdictions outside the U.S. We
cannot predict the outcome of these investigations or the impact on our business or Ñnancial
results.
As part of the ongoing investigations of market practices in the property and casualty insurance
industry involving the payment of contingent commissions to brokers and agents, we have received
subpoenas and requests for information from the Attorneys General of several states, as well as from
various other regulatory agencies. We also have received subpoenas and requests for information as
part of investigations by several state and federal regulators and enforcement agencies, including the
U.S. Securities and Exchange Commission and the U.S. Attorney for the Southern District of New York,
relating to certain loss mitigation and Ñnite reinsurance products. In addition, we have received and
responded to similar regulatory inquiries in Canada, the United Kingdom and elsewhere. We may
receive additional subpoenas and other information requests from Attorneys General or other
regulatory agencies regarding similar issues. We are cooperating, and intend to continue to cooperate,
fully with these investigations. Although no regulatory action has been initiated against the Corporation,
it is possible that one or more regulatory agencies may pursue an action against the Corporation
in the future on the issues currently under investigation or on similar issues. We cannot predict the
ultimate outcome of these investigations or the impact on our business or results of operations.
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