With the looming prospect of nearly $2 billion in professional liability claim payments, fallout of an alleged Ponzi scheme orchestrated by Bernard Madoff, insurers will likely embark on more careful underwriting of financial firms, one expert said.
“It's certainly going to have an impact on [insurers'] underwriting procedures,” said Stephen Mildenhall, head of Aon Benfield's Actuarial and Enterprise Risk Management practice, which developed a $1.8 billon best estimate of direct insurance losses that could be paid out on behalf of asset management firms, banks and other firms being sued in the aftermath of the Madoff scandal.
“It is astonishing that something of this size and scale managed to proceed…for a number of years without being detected,” Mr. Mildenhall said. As a result, “I would imagine that there would be some heightened underwriting within this class,” he added, referring to the financial institutions E&O/D&O class, already “pretty much under the microscope” as a result of the subprime/credit crisis.
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