2009-07-08

By Editor, CIR

Increasing litigation in directors' and officers' (D&O) liability and a rising level of claims could swamp insurer Chubb's reserves, warns an investor report from Barclays Capital.

It suggests that "given a potential for a wave of D&O litigation, Chubb does not appear appropriately reserved because its 2008 US D&O loss ratio (estimate) of 78% is mostly in line with its median developed loss ratio over the past 10 years, despite D&O prices declining 50% from the peak in 2002."

Barclays Capital analyst Jay Gelb estimated that Chubb's D&O losses could escalate to as much as $10 billion, based on a $2 billion annual loss spread over several years.

"Our sense is industry D&O losses could be meaningful in the wake of the financial market dislocations and the recession," Gelb wrote. Chubb's 15% share of the D&O market makes it the the third largest player, according to the report. Chubb has so far declined to respond to the report.

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