Chad Roth has done a terrific job getting to know the markets and market players and below are Chad's notes from today's NY chapter meeting which touches on new and interesting hot topics in the D&O market with some comments in CAPS about ideas we have. Feel free to share your ideas or needs in this area so we can help. Thanks, Mason
I attended this morning's RIMS Chapter Meeting focusing on D&O. The moderator of this session was Brian Wanat (Aon). The panelist were Mike Price (HFP), Tony Galaban (Chubb), Mike Smith (AIG), and Scott Meyer (ACE).
Here are a couple of thoughts / notes I jotted down during the session.
- With all the FI issues out there, portfolio management seems to be a big topic. Making sure your book is diversified is necessary to weather subprime. I was thinking Advisen should try and put together some type of e-mail that describes some of the off-line work we can do w/ to help senior management at carriers better understand their book and explain it to their superiors. Taking some of the data Advisen can provide and then tying it in with their loss info could be kind of powerful. Any thoughts?
TWO THINGS WE CAN DO: (1) WE CAN RUN THEIR POLICYHOLDER LIST AGAINST OUR VARIOUS INDUSTRY/FINANCIAL FIELDS TO IDENTIFY THOSE CLUSTERS OF COMPANIES MOST LIKELY TO REPRESENT ACCUMULATION RISKS. I'M NOT EXACTLY SURE OFF ALL THE KEY INDICATORS WE SHOULD BE LOOKING FOR, BUT I SUSPECT OUR CLIENTS HAVE SOME IDEAS. (2) LOOKING ACROSS LOBs, MSCAd's RELATED CASE FEATURE CAN BE USED TO MODEL ACCUMULATION RISK.
- Red Flag: A red flag that the markets seem to be looking at is large debt payments due in 2009. Typically in the past a company might refinance their debt before these large payments.
Given the current credit environment, they might not be able to refinance or it may be it a higher rate. It may be a fun little exercise to create a list of the companies with the highest debt payments due in 2009. Maybe release that list in conjunction with the PLUS D&O Symposium.
- Counter Party Risk: They were saying how some risk managers are starting to ask more questions about the carriers they use. They want to make sure that those carriers will be around to pay their claims. It seems like they have lost faith in the rating agencies.
- Defense cost is still a hot topic. Underwriters are curious as to who the outside counsel is on their risk and the relationship. I'm not sure what we can do here, but this topic is not going away. It would be interesting if we could do some analysis of the counsels involved in MSCAD cases.
DEFENSE COST IS GOING TO BE A MAJOR PART OF OUR FORTHCOMING REPORT ON 2008 SCAS ETC. IN THE NEW ENVIRONMENT, PLAINTIFFS FIRMS ARE BRAINSTORMING NOVEL NEW THEORIES AND ARE FILING MORE CASES IN STATE COURTS, WHICH WILL MAKE IT MORE DIFFICULT TO CONSOLIDATE CASES INTO LARGE CLASS ACTIONS. AS A RESULT, DEFENSE COSTS ARE LIKELY TO SKYROCKET.
Chad M. Roth