D&O Underwriters Must Adapt to a Rapidly Evolving Securities Litigation Landscape, According to a New Advisen Study.
Novel allegations, skyrocketing defense costs and the prospect of major regulatory reforms create new challenges for insurers.
(New York, Feb. 26, 2009) Rapidly unfolding legal, economic and regulatory events are transforming securities litigation, forcing directors and officers liability (D&O) underwriters to react quickly to a changing environment, according to a new report from Advisen Ltd. Traditional securities class action suits still are the most significant type of securities litigation for public companies, but a growing number of suits, filed in state courts, allege common law torts and breach of fiduciary duty. Combined with likely regulatory changes under the Obama administration, D&O insurers are faced with a broad array of new challenges. Players in the D&O market must “adapt or die off,” in the words of one leading attorney.
Advisen’s Securities Litigation in 2008: It’s Impact on the D&O Market in 2009 and Beyond examines all forms of securities litigation that might trigger D&O coverage, not only securities class action suits. Drawing from Advisen’s MSCAd™ large loss database, the report profiles the full array of 2008 securities lawsuits, including shareholder derivative suits, securities fraud suits filed by regulators and law enforcement agencies, and so-called “Section 11” securities class action suits filed in state courts. The report also examines suits triggered by the alleged $50 billion Ponzi scheme perpetrated by Bernard Madoff and the alleged $8 billion investor fraud scheme linked to R. Allen Stanford. These schemes have already spawned more than 120 lawsuits in 2008 and 2009.
“The plaintiffs bar outdid itself in creativity and resourcefulness in 2008,” said Dave Bradford, Advisen Executive Vice President and author of the report. “Complaints often put forward novel theories of liability, and many suits were crafted to avoid the higher pleading standards of federal securities class action suits. One outcome has been higher defense costs for defendants and their D&O insurers.”
The report also explores the legal, economic, political and regulatory forces shaping the D&O insurance market, and examines shortcomings in D&O claims management that are contributing to higher defense costs. Additionally, it looks into the impact of skyrocketing bankruptcies on securities suits, and assesses further changes in the litigation landscape likely to come about under the Obama administration. Experts in securities litigation and D&O insurance offer their insights into recent developments and their implications for the future.
To help readers track potential exposure by company, Advisen's report includes a list of companies facing securities lawsuits in 2008 and a list of companies facing multiple lawsuits over the past thirteen years.
To be more informed in planning for 2009 and beyond, purchase the complete report for $249 at http://corner.advisen.com/reports_topical_Securities_Litigation_2008_DO_Market.html.
The report provides summary counts of cases and breakouts by industry and other filters. Readers interested in creating their own lists of cases may do so for a small fee by e-mailing corner@advisen.com and including MSCAd™ in the subject line.
MSCAd is part of the Advisen.com workstation which provides business and insurance information on over 13,000,000 companies; 2,700 policy forms; 271,000 insurance program benchmarks and also provides predictive risk models. Subscribers to Advisen.com are more informed and are able to translate this knowledge into increased customer retention and new business. For information on these services, contact Advisen at support@advisen.com and enter “info” in the subject line.
About Advisen
Advisen manages business information and market data for the commercial insurance industry and maintains critical risk analytics and time-saving workflow tools for over 530 industry leading firms. Through its work for the broadest customer base among information service providers, Advisen delivers actionable information and risk models at a fraction of the cost to have them built internally. Designed and evolved by risk and insurance experts, and used daily by more than 100,000 professionals, Advisen combines the industry’s deepest data sets with proprietary analytics and offers insight into risk and insurance that is not available on any other system. Advisen is headquartered in New York. For more information, visit http://www.advisen.com or call +1.212.897.4800 in New York or +44(0)20.7929.5929 in London.