2009-06-24

By Editor, CIR

Claims under directors' and officers' (D&O) liability policies taken out by US companies could land insurers with a $6 billion bill, warn insurance consultants.

According to insurance expert Advisen, the final bill could be as much as $10 billion if the cost of ecompensation for errors and omissions is included.

A survey of US class action lawsuits by Towers Perrin and Cornerstone Research finds that the credit crunch and crisis in the financial services sector has increased the number filed against companies and their senior executives in the past two years. A total of 210 securities class actions were instigated in 2008, a 19% increase on the previous year and nearly half involved financial services companies.

Advisen says that while the cost of cover for D&O cover across all sectors of the US economy actually dipped last year by 2% to 3%, the financial services sector saw premium increases of more than 30% and some firms regarded as particularly vulnerable to claims were unable to secure cover at any price.

The Association of Insurance and Risk Managers (AIRMIC) recently reported that fears of similar litigation here had persuaded UK firms to increase their D&O limits.

Its survey of 277 member companies found that 25% now carried total limits of £100 million and above, with coimpanies in the chemical, pharmaceutical and natural resources sector paying most for D&O cover followed by companies in the financial services sector.

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