D&O costs mount on both sides of the Atlantic
More lawsuits are being filed in the US, while
UK firms are buying higher limits
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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