CLIENT ADVISORY
TO: All Legacy Risk Solutions, LLC Clients
RE: D&O Liability Insurers Brace for Sub-Prime Attack
The sub-prime mortgage fallout is predicted to hit the Directors & Officers Liability insurers in 2009. Lawsuits have already been filed against major players in the transactional side of the business. The financial services insurance products at risk include Directors & Officers Liability, Fiduciary Liability and Financial/Investment Management Errors & Omissions Liability.
1. Directors & Officers Liability – Suits against the directors and officers of the companies that set up and directly managed the accounts.
2. Fiduciary Liability – Claims by employees or trust beneficiaries against pension or trust fund managers or the employees of companies who served on the Investment Committees.
3. Financial/Investment Management Errors & Omission Liability – Actions by the customers against investment management companies who advised their clients to invest in companies that were involved in sub-prime mortgage investments.
At this point, it is difficult to predict the magnitude of the insured losses. Nonetheless, the insurance industry is expected to use the building level of cases as the justification for increasing pricing in a range of 15% to 25% for D&O renewals occurring after 1/1/09. This trend is expected to continue through 2009 and 2010.
Suggested Strategies
1. Inform the Board of any owned or controlled business enterprises now that there is a building pressure for price increases for financial insurance products.
2. Request the insurance agent/broker to provide optional higher and lower limits of liability for the 2009 renewals of any financial insurance product.
3. Request a disclosure from your financial/investment advisor of any portion of the investments that were or are now in the sub-prime mortgage area. This disclosure, when received, should be passed on to all parties that share in the investment. This should all be done in concert with advice from legal counsel.
4. Directors & Officers Liability insurance companies believed to have little exposure to sub-prime, CDS or Securities Lending Liability include:
• ACE
• Chubb
• Travelers
Questions can be directed to Ken R. Butler, CPCU, ARM, at 330-659-6337 or kenblegacy@aol.com. Also, please feel free to refer to our updated website: www.legacyrisksolutions.com.
Sincerely,
Ken R. Butler
Ken R. Butler, CPCU, ARM
President & CEO
KRB/md
Ken R. Butler is the President and CEO of Legacy Risk Solutions, LLC. Mr. Butler is an entrepreneur and industry leader in the analysis of affluent family and business risk management needs and development of legacy preservation plans.
Fee Only – No Commissions – No Conflict of Interest
This article is a general discussion about the subject matter and should not be represented as applicable in any state in the United States of America. This document is for the exclusive use of Legacy Risk Solutions, LLC clients. It shall not be reprinted or portions reproduced in any form, by any other party, without the permission of the author. Author contact: 330.659.6337 or 330.283-0952, or KenBLegacy@aol.com. The Legacy Risk Solutions website is: www.legacyrisksolutions.com.
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