Financial-institution D&O bearing brunt of financial turmoil

While the cost of directors and officers liability insurance is flat or declining for most insureds, rates for financial institutions-related D&O have increased 30% or more in 2009, reports Standard & Poor’s.
In its report, Directors’ & Officers’ Insurance: An Evolving Product Line, S&P’s says that publicly traded financial institution D&O exposure is viewed in general by insurers as a higher risk cover today than it was a year ago.
“Standard & Poor’s Ratings Services believes that the issue, however, is one of concentration and correlation,” the report says. “Insurance and reinsurance companies that are overweight with financial institution D&O exposures across a number of financial institutions may face higher losses, and those that offered substantially larger limits will likely also be more at risk.”
Because D&O is a diverse and disparate product line with many types of risks and different trends occurring simultaneously, there will likely be many issues shaping the product line in 2009 and 2010, the report continues.
“The key is that not all parts of the D&O product line move similarly, thus focusing on the different types of risks insured is important to understanding the risk that insurance providers have written.”
One of these risks is the increasingly complicated legal process, the report continues.
“Plaintiff lawyers can push D&O claims to new types of insureds, which makes past performance less valuable in predicting future losses and adequate prices.”