Subprime insurance lawsuits reach $3 billlion
LOSSES & LAWSUITS
NEW YORK – The number of lawsuits filed against firms and individuals in the wake of the credit crisis is leading to huge losses for insurance companies. Property casualty managers providing cover for directors and officers from mortgage lenders and investment banks have reported billion-dollar writedowns since the onset of the summer's subprime crisis.
Studies by Willis Group Holdings and Guy Carpenter brokers suggest losses of around $3 billion – a wounding but not fatal blow to insurers who currently pay out costs of around $9 billion per year in directors and officers (D&O) coverage claims.
The losses to insurers are likely to be exacerbated by litigation filed not just by lenders but by the large banks that securitised their lending and have since recorded the largest losses since the summer.
Insurance industry sources had said in September they expected an acceptable subprime exposure.
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