D&O Losses from subprime to be $3.6b

D&O insurers are likely to suffer $3.6 billion in subprime-related losses.

David Small or Bear Stearns has estimated $9.3b as a worst-case D&O scenario. As I posted here and here, David uses a sensible methodology to generate this estimate.

Advisen is able to generate an estimate of what is likely versus what is worst-case. Based on historical securities class action settlement patterns and D&O program limits and retention data from Advisen’s Program Benchmarking database, data sets available only to Advisen allow us to generate this estimate.

Advisen will publish a report (see press release here), “The Crisis in the Subprime Mortgage Market and Its Impact on D&O and E&O Insurers,” on Monday, February 11 which covers how we arrive at $3.6b and details:

• An updated list of subprime writedowns reported by more than 120 financial institutions across the globe,
• Market cap losses experienced by those companies,
• Subprime-related lawsuits filed against those companies,
• An analysis of the 181 subprime-related lawsuits,
• Advisen’s forecast methodology for subprime D&O and E&O losses,
• Market share of the top ten writers of financial institution D&O and E&O,
• The contribution of subprime losses to 2007 and 2008 loss ratios, and
• The impact of the subprime meltdown on D&O and E&O pricing based on program data reported by risk managers and brokers, and on the results of a survey of 110 financial institution insurance buyers.

“The Crisis in the Subprime Mortgage Market and Its Impact on D&O and E&O Insurers” is available to subscribers of the full Advisen information platform for $200, and to non-subscribers for $500 by calling Advisen at 212.897.4800, or emailing support@advisen.com in the US, or +44 (0)20 7929 6929 or london@advisen.com in the UK.