More sub-prime anxiety for insurers

North America

A recently released report by insurance data analysis firm, Advisen Ltd, estimates that the US$170.0bn written down by companies in 2007, is only the ‘tip of the iceberg’. According to the Advisen report, “Sub-prime-related Write downs: Potential Exposure to D&O and E&O Insurers”, companies may have as much as $1.2tn in collateralized debt obligations and other securities backed by sub-prime mortgages on their balance sheets. In addition, the crisis in the sub-prime mortgage market has also to date triggered 113 lawsuits which include securities class action suits, derivative actions, fiduciary liability suits, underwriting malpractice suits and other related suits. Advisen says that of the 112 companies reporting write-downs, 24 have been sued. A number of those companies have experienced multiple suits.