US sub-prime claims could top $3bn
The subprime crisis will cost insurers up to $3 billion, according to reports released by Guy Carpenter and Willis this week.
Shockwaves sent out by the crisis will affect businesses even further outside the sphere of financial institutions than previously thought, the reports say.
Both reports agree that $3 billion lost in directors’ and officers’ (D&O) and errors and omissions (E&O) policies is the worst case scenario, with Guy Carpenter estimating that D&O losses alone will exceed $2 billion.
Guy Carpenter estimates the “final answer” on the crisis will not come until 2008 or 2009.
Willis said: “The impact is not limited to financial services firms, with industries as diverse as the automotive, manufacturing, food services, media and energy all suffering consequences.”
“In these industries, the credit crisis has either delayed or cancelled bond offerings, spin-offs and acquisitions or simply made these transactions more costly than originally planned.”
Guy Carpenter said: “One reason why the impact is likely to be greater than appears is that investor may begin to file against companies not involved in subprime lending.” It cited the Northern Rock collapse and the litigation that has already arisen from it.
“Because investors are still filing, new causes of action continue to be discovered, and the list of potentially affected companies is likely to keep growing.
“Insured losses could account for 30% to 35% of D&O industry premium”, the report added.
