Thursday, 13 November 2008

Another Measure of D&O Risk?

My grandfather never believed in the efficacy of reforming the criminal mind, "once a crook..."

I don't know Barry Minkow beyond reading the story in the WSJ today (here and on pg1 of Marketplace) but after serving time for a "stock swindle" he seems to have won the praise of the FBI according to the article and is trying to (profit from) pointing out corporate fraudsters.

This reminds me of the early days when Howard Schilit (who never served time) used business school students to demonstrate manipulation of corporate earnings and wrote his book "Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports" (description on Amazon here).

Advisen reached out to Howard, we had a great breakfast meeting listening to how he took some reports on a handful of companies from the grad school lab to an actual business. I always enjoy hearing these stories from entrepreuners like Howard, the courage to start a business using your own family money can't be appreciated enough.

Howard started CFRA in 1994 and sold it on to what is now the RiskMetrics Group (see press release here). Howard brought in an executive from Goldman Sachs to institutionalize his models such that there would be indicative scoring on thousands of public companies while deep forensic due diligence might only be completed on a few hundred public companies.

To provide commercial insurance underwriters with an important measure of risk, especially to those in the D&O market, Advisen has carried the indicative scoring, the full reports and a dashboard of CFRA scores to make risk analysis quicker and more complete. This measure of risk is incorporated into our company exposure look-up pages, available in our risk & insurance search engines and in our configurable underwriting work-ups.

I'm curious whether readers would find Mr. Minkow's research worthy of being included in our risk profiles. His company is the Fraud Discovery Institute here.

Please let me know in the comments or by e-mail.

Thank you
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Thursday, 6 November 2008

The Professional Lines Market Speaks

Yesterday Advisen published a report on how D&O losses will be $5.9 billion from subprime and the credit crisis, the report is here.

Today we published a report on E&O losses - an additional $3.7 billion. We are the only player to publicly forecast this figure - because we have data that others don't have. The report is here.

In today's press release we also called for the end of the soft market. Not just in D&O or E&O for financial institutions, but broadly. See the release here.

We've had a ton of feedback on this. Tomorrow we're publishing comments from the following: Ryan Collier, Kevin Lacroix, Christopher J. Cavallaro, Peter Taffae, Joe O’Donnell, Chris Warrior, Brian Wanat, Gary Dubois, Paul Schiavone, Chris Duca, Nick Conca, Chris Hewitt, Tim Kelly, Jason White, Larry Goanas, Dennis Donovan and Dennis Gustafson.

I just wish we'd hooked up a chat board around this.
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Wednesday, 5 November 2008

$9.6 billion in Insured D&O and E&O Loss from the Credit Crisis

The PLUS International conference expects over 1,600 attendees in San Francisco this week including 4 from Advisen.

Timed for the start of this conference Advisen has launched a special edition newsletter (see here) to publish news stories about professional liability and most importantly, to publish unique and groundbreaking research by Advisen.

Today we started with a revised forecast (upwards) as a result of the meltdown of the subprime mortgage market and the ensuing credit crisis. for D&O insured loss. In February, Advisen forecast $3.6 billion of insured losses but as the credit crisis has mushroomed into a global financial calamity, we have revised the forecast to $5.9 billion.

The free report on D&O losses is available here.

Advisen is the first to forecast the insured loss for E&O from the credit crisis saying that E&O losses will be centered around mortgage brokers who will see thousands of smaller lawsuits and around mortgage lenders who will see fewer, but higher value suits, the total being $3.7b.

The free report on E&O losses is available here.

AIG has had top market share in both financial institution D&O (19%) and E&O (34%) and Advisen expects new insurers to enter the market. To prepare buyers, brokers & insurers for operating in the new world order in the financial services sector, Advisen has published a comprehensive 38-page study of the changed industry landscape and how it impacts on risk and insurance.

The full report on the financial services industry is available here.
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