Subprime Issues for D&O: Claims, Capacity and Pricing

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Presentation transcript:

Subprime Issues for D&O: Claims, Capacity and Pricing CAS Spring Meeting June 17, 2008 Copyright 2008, Advisen Ltd Copyright 2008, Advisen Ltd.

(Range: $2.6 billion - $4.4 billion) Against $6.25 billion NEP (U.S.) Subprime D&O Losses How bad can it be? Advisen forecast: $3.6 billion (Range: $2.6 billion - $4.4 billion) Against $6.25 billion NEP (U.S.) Copyright 2008, Advisen Ltd

Subprime D&O Losses Who has the exposure? Financial Institution D&O Market Share 1. AIG 19.42% 6. ACE 4.72% 2. Lloyd's 16.82% 7. Hartford 2.72% 3. XL 11.42% 8. Arch 2.65% 4. Chubb 9.66% 9. AXIS 2.06% 5. Travelers 5.93% 10. CNA 1.96% Source: Advisen Based on $420 million of financial institution D&O premium written in 2006 – 2007. Copyright 2008, Advisen Ltd

Impact of Subprime Losses on D&O Pricing Most likely will not be enough to turn D&O cycle overall Pricing impact localized Impact will be short-lived Copyright 2008, Advisen Ltd

Impact of Subprime Losses on D&O Pricing Advisen survey of 110 financial sector risk managers 90% renewed at expiring or lower past 12 months 14% with coverage enhancements However, trends indicate more increases in coming months Copyright 2008, Advisen Ltd

Impact of Subprime Losses on D&O Pricing Changes in Renewal Premiums Copyright 2008, Advisen Ltd

Impact of Subprime Losses on D&O Pricing % Programs Renewing with Increases Copyright 2008, Advisen Ltd

Impact of Subprime Losses on D&O Pricing SCAS Filed Copyright 2008, Advisen Ltd

Impact of Subprime Losses on D&O Pricing ADVx™ D&O v. Composite Copyright 2008, Advisen Ltd

Impact of Subprime Losses on D&O Pricing Surplus as % GDP Source: AM Best, USBLS Copyright 2008, Advisen Ltd

Impact of Subprime Losses on D&O Pricing Policyholders’ Surplus as % GDP v. ADVx™ D&O Copyright 2007, Advisen Ltd. Copyright 2008, Advisen Ltd