D&O Insurance Rates Expected To Hold Steady Except For Financial Institutions

Because shareholder actions are expected to proliferate against finacial institutions caught in the subprime mortgage debacle, it should come as no surprise that premiums for directors and officers insurance for those institutions are beginning to rise.  So says Kristin Gunderson Hunt in an article in "Business Insurance."  See D&O Rates on the Rise.  In the past month, D&O rates have climbed 5% to 10% for fincancial institutions.  For companies in other industries, rates may have stopped declining as in the past three or four years, but they do not appear to be rising.

 The number of such lawsuits and the nature of the allegations asserted by shareholders and investors remains to be seen.  From what is already known, however, the class-action plaintiffs bar will have much to work with: incredibly lax mortgage underwriting procedures, bogus or baseless valuations of impossibly complex securities, overly rosy projections, tardy disclosures, blind-leading-the-blind investment strategies --- it won't be pretty.  Perhaps we will not see as much dirty fraud as in the Enron case, but early indications portend an industry-wide recklessness not seen since the captain of the Exxon Valdez lumbered through Prince William Sound.

However, reports Ms Hunt, companies not subject to these lawsuits should have little trouble obtaining D&O coverage at no worse than expiring rates.