Headline Events Can Lead to High-Profi le Impairments


Catastrophic losses from man-made or natural events can lead to claims against the insurers themselves for the decisions they made prior to the shocks.


We spent an awful lot of time looking at circumstance reporting language under the D&O policy to make sure that even though they had not been sued yet, it was a foregone conclusion that it was coming and we were able to perfect coverage.


Tracy Forst, Aon


Modern history is marked with the names of once high- fl ying insurance organizations that came to a poor end. Major catastrophes such as the 9/11 terror attacks and Hurricane Katrina have been followed by the impairments of reinsurers, insurers and pools, Forst said.


“In Katrina, one of the state wind pools was deemed to be insolvent given the size of the losses in the Gulf. That wind pool was represented by people from various insurance companies that wrote in that particular state,” Forst said. “That was the management of the wind pool. They bought some modest D&O limits, $2 million to $5 million in limits. The shortfall to the wind pool was in excess of $100 million. That board actually got sued.”


The other lesson of the wind pool’s experience is that members of the board who were offi cers of other insurance organizations needed to add themselves to outside-director endorsements for their own D&O policies, Forst said.


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