Notes from the PLUS D&O Conference

Always good to see clients, friends and even some folks who admitted to being readers of this blog. We're in the process of redesigning www.advisen.com and will be featuring blog posts from Dave Bradford and me among others and pull in from other favorite commentators.

Dave presented at PLUS about the correlation of bankruptcies and D&O loss and the audience really seemed connected to this important topic. The findings Dave presented were a small part of the research Advisen can conduct and we are looking for equity partners in the project.

This means firms with interest in getting a securities litigation risk score for all U.S. public companies based on their risk of bankruptcy should contact me. By joining others in the initial funding partners will be the only recipients of these risk scores. mpower@advisen.com if interested.

VJ Dowling who I enjoyed meeting at the Allied World party (they have a company rock band which did some good covers), provided a bit of color to Dave about the performance of Odyssey Re (see earlier post about trailing twelve month market cap performance for commercial insurance companies).

Apparently Odyssey's CEO has said he'd love to claim underwriting genius but it was the brilliance of their chief investment officer who foresaw the credit crisis and bet accordingly. If you look at the chart he must have been selling what Joe Cassano at AIG was buying.

Insurance Company Stock Performance

We all know stocks are down and that the financial services sector has been hit the hardest, but I thought it interesting to note the relative performance of the commercial (re)insurance underwriters.

The chart shows that amazingly there are 2 firms in Odyssey Re and Navigators that are up in market cap in the last 12 months.

Unsurprisingly, the firms most in the news including AIG, Hartford, XL & Swiss Re are the firms losing more than 80% of market cap.

I believe the prices reflect investor's opinions of the investment performance and exposure to credit insurance more than underwriting performance, but those underwriting loss ratios will be a big driver of market cap growth as the big claims from subprime and the credit crisis make their way through the system and reserves are set.

E-mail support@advisen.com to get charts like this and other insightful data and analytics.

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.

$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.

What Risk Managers are Saying about AIG

In the wake of AIG's near collapse, there were a lot of rumors about a mass exodus of corporate policyholders of the AIG insurance subsidiaries.

Advisen had 1,000 buyers of commercial insurance complete a survey. Having a 15% response rate means they were dying to speak up.

Most commercial insurance buyers reported to Advisen that, while they are confident in the financial strength of AIG following the $85 billion loan by the federal government, two thirds of AIG commercial lines policyholders plan to get quotes from AIG’s competitors when their policies renew. Excerpting from Advisen’s Special Report, one likely outcome is that AIG will compete vigorously to retain business, potentially intensifying price competition in an already-soft insurance market.

The full report is available by e-mailing corner@advisen.com.