D&O and E&O Liability and Coverage Issues Resulting from Subprime Claims

Eighteen months after the first lawsuits relating to subprime mortgage lending were filed, the claims frequency from subprime claims already has passed the number of lawsuits filed during the savings & loan crisis of the early 1990s. The substantial financial losses associated with subprime mortgage lending and the follow-on impact on the credit markets are already resulting in increased frequency of losses under directors and officers liability (D&O) and errors & omissions (E&O) policies. As of this date, insurance analysts have estimated the potential underwriting exposure of D&O and E&O insurers for losses resulting from subprime lending to be as high as $8 billion. This estimate does not include or address investment losses incurred by insurers through investment of their premium dollars. This analysis also does not address the related issue of D&O and E&O exposures arising from credit risk problems resulting from--but not related to--subprime lending.