D&O Costs Skyrocket

Directors’ and Officers’ (D&O) liability insurance costs for financial institutions increased 50 percent in the fourth quarter of 2008 compared to that of 2007, according to the Quarterly D&O Pricing Index from Aon Corp’s Financial Services Group. This is the first time year-over-year price increases were found in over five years. Aon said a number of unprecedented events contributed to the significant price increases, including: reports of more than 1 million job losses in Q4 2008; Bernard Madoff’s alleged Ponzi scheme; a substantial decline in major stock indices; and federal securities class action lawsuits activity in 2008. Aon’s D&O Index also shows that the average price for $1 million in coverage limits increased 3.15 percent from Q4 2008, compared to Q4 2007. This is the first time since 2003 that price increases in the financial sector have been significant enough to move the entire index. So will there be more? “In the short term, we expect to see D&O pricing for the financial sector continue to rise,† said Mike Rice, managing director of Aon’s Financial Services Group and author of the Index in a press release. “It is possible, however, that a tough underwriting environment could emerge for all public companies as the economy continues to negatively impact both financial results and stock prices.†Ã‚  

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