Advisen recently issued three reports, on the D&O market, E&O market and the financial services industry, containing predictions on the impact of the subprime/credit crisis on insurers worldwide.

With respect to D&O claims, Advisen predicts $5.9 billion in losses for claims during 2007, 2008, and 2009. This amount includes $5.5 billion attributable to settlements and defense costs from securities class action suits, which is the estimated insured portion of the expected $27 billion in securities class action settlements. Advisen observes that these losses will be borne mostly by a few D&O insurers that write financial institution risks and Advisen predicts that there will be increases in premiums for financial institution D&O coverage and real estate companies’ D&O coverage.

With respect to E&O coverage, Advisen anticipates $3.7 billion in E&O losses over 2007, 2008 and 2009, approximately $2.2 billion of which will fall in 2008. It expects that most of the losses will be borne by a small number of large financial institution E&O insurers and observes that subprime losses are leading to increased premiums for some segments of the E&O market but are not large enough to reverse the overall soft market.

Advisen anticipates that certain insurance coverage issues will arise in the handling of both D&O and E&O claims. It identifies various exclusions that will be invoked by insurers to deny coverage, including exclusions for fraud, illegal conduct, prior acts and known loss. Advisen also anticipates that interrelated wrongful acts provisions will be the subject of coverage disputes. Finally, Advisen expects that some insurers will attempt to rescind coverage based on alleged material misrepresentations in policy applications.