December 5, 2001

notice to policyholders conerning the wind-up of the Canadian Branch of Reliance Insurance company

When an insurance company fails

For well over a century, hundreds of competing property and casualty insurance companies in Canada have honoured millions of claims - amounting to billions of dollars - promptly, and in full. Insurance company failures, although rare, can and do occur. That's why Canada's property and casualty (P&C) insurance companies fund a special program, approved by government regulators, to protect policyholders and claimants.

When a Canadian P&C insurer like the Canadian Branch of RELIANCE INSURANCE COMPANY ("RELIANCE (CANADA)") is wound-up, the industry-funded, non-profit Property and Casualty Insurance Compensation Corporation ("PACICC") will respond to claims of policyholders under most policies. You don't need to apply for protection; it is extended automatically to eligible policies.

A wind-up order was made in respect of Reliance (Canada) by the Ontario Superior Court of Justice on December 3, 2001. Reliance (Canada) had been writing mainly commercial business in Canada and had been running off its business. There are currently less than 15 policies in force, excluding the Meridian vehicle warranty program. Reliance (Canada) was licensed for property, accident and sickness, aircraft, automobile, boiler and machinery, fidelity, liability and surety. PACICC's coverage does not extend to aircraft, fidelity or surety and while it responds to some liability it does not respond to directors and officers, employers liability, or certain errors and omissions insurance, although medical malpractice is covered.

Procedures

In this particular case, the provisional Liquidator ("the Liquidator") has been authorized by the court to try to sell the book of business in Canada of Reliance (Canada). In the circumstances, policies will remain in force, and, as claims occur they will be reviewed by the Liquidator who will make a determination as to payment. The Liquidator has been given until January 31, 2002, to find an insurer to take over responsibility for the Meridian vehicle warranty program and until April 30, 2002, to find an insurer to take over responsibility for the other policies, or until such further dates as the court may allow. We are hopeful that such insurers will, indeed, be identified. In the event this does not occur, the Liquidator is likely to seek court authorization to cancel the policies and we will give you further information at that time.

Property and Casualty Insurance Compensation Corporation
20 Richmond Street East, Suite 210
Toronto, Ontario M5C 2R9
1-888-564-9199 / 416-364-8677
website www.pacicc.com