How are property, casualty, and fidelity claims being influenced by the credit crisis? To understand the exponential impact of the credit crisis, one must first understand the root cause. The lack of available credit will create financial pressure on individuals and businesses, and eventually will prompt fraudulent claims. Various aspects of the claims adjustment process, such as advance payment requests involving legitimate claims, will also be impacted by the lack of credit available to businesses. Rest assured, adjusters and forensic accountants will need to be on the top of their game in the coming months and years.

Ripple Effects

When subprime borrowers defaulted en masse, it caused a tremendous ripple effect beyond the original borrower. It impacted the investors who purchased the investment products created through securitization; the insurance companies that agreed to indemnify certain retained risks associated with the securitization of the pool of subprime loans; the finance company that no longer has capacity to lend; and banks that are not willing to write, extend, or renew existing credit facilities. As such, many consumers were no longer able to secure mortgages, obtain credit cards, and buy automobiles. Businesses could not borrow working capital to expand.