Several newsletter articles addressed two other economic impacts--the potential for increased claims activity, and opportunities for E&S/specialty insurers to cover new risks not being taken up by traditional insurers.

Addressing the opportunities, Robert Lala, a senior vice president for Liberty International Underwriters, said that in the current economy, commercial enterprises may be more exposed to two sources of uninsured risks--financial difficulties of key business partners and their own decisions to expand into unfamiliar areas.

Throughout the downturn, E&S insurers continue to offer coverage for the toughest risks--new and unfamiliar products--as well as higher limits of excess liability coverage, he advised in an exclusive article he authored for the September newsletter.

In addition to businesses, some specialty insurance market participants are crafting policies to help individual consumers deal with consequences of a down economy.

NU Associate Editor Phil Gusman reported on one such offering in our January edition--from automaker Hyundai, underwritten by Cincinnati-based Great American Insurance Group. The offering, said to be unique in the United States, allows car buyers to return cars and cancel their auto loans if they lose their jobs or experience any other covered event.

Job losses, particularly among an ever-expanding population of aging baby boomers, were top-of-mind problems for participants in the fiduciary and employment practices liability insurance this year, as broker and carrier executives revealed in special reports in the June and November editions of this newsletter and NU magazine.

Specialty insurance executives said they were already bracing for an onslaught of lawsuits before last year's meltdown in the global financial markets.

The economic downturn is adding "new dimensions to the mix," added Paul Slamar, managing director and fiduciary liability insurance product leader for Aon Financial Services Group in Chicago. Plant closings, divestitures and layoffs are contributing to growth in the ranks of voluntary and involuntary former benefit plan participants, he said.

Cathy Padalino, vice president and EPL product manager for Chubb & Son in Warren, N.J., offered a similar assessment on the EPL front. "Just simply based upon the demographic makeup of the baby boomer generation, the odds are higher and higher as the clock ticks that someone [losing his or her job] is going to be of [that] protected class," she said.

Mr. Slamar said the current economic environment, together with plaintiff-friendly court rulings of recent years, "could simplify the means by which competent plaintiffs' firms conversant with ERISA can seek to pursue class actions on behalf of former participants," he said.

In contrast, Ms. Padalino and other EPL experts pointed to some factors potentially mitigating the severity of claims for EPL insurers, including the widespread use of severance agreements curbing rights to sue.

EPL and fiduciary liability experts alike, however, said they are keeping a watchful eye on the activity in the courts, as well as reactions from a new administration in Washington and federal lawmakers, pointing to signs that all three government branches are raising the stakes against them.

Stay tuned for more in Item #6 below.

#5: The Hard Market Minute

Like NU's print magazine, the specialty newsletter did include a number of reports on shrinking revenues of insurers and brokers--mainly focusing on the impact of soft-pricing conditions that continue today in many segments.

Reporting on A.M. Best's analysis of the E&S market, our October edition said the rating agency tallied a second-consecutive year of falling U.S. surplus lines premiums--a 6.2 percent drop in 2008, following a 5.3 percent decline in 2007.

The last time premiums fell for two years straight was back in 1988 and 1989, when the drops were 4.3 percent and 2.5 percent, respectively, rating agency analysts reported in their latest update on the state of the surplus lines market prepared on behalf of the National Association of Professional Surplus Lines Offices, Ltd.

In the report, which was delivered during NAPSLO's annual conference in October, the rating agency also tallied direct U.S. premiums written for a subgroup of the E&S market it refers to as domestic professional surplus lines insurers--U.S. insurers writing more than half their direct premiums on an E&S or non-admitted basis.

The $24.8 billion premium total for domestic professionals in 2008 was a full 11 percent lower than the $27.7 billion figure for 2007, marking the first double-digit drop for domestic professionals since 1988.

"We said a year ago that we really anticipated the market having a definitive change--some sort of a hardening by this point," David Blades, a Best senior financial analyst, told NU, revealing one of the most surprising conclusions of his research. "The more people we talk to, the more we realize how far that's getting pushed out now," he said, noting that many market participants don't see a turn happening until late in 2010.

A dozen E&S carrier and broker executives who spoke to NU at NAPSLO and in the days leading up to the event confirmed the view, and generally said that momentary signs of a stabilizing or turning market, particularly on the casualty side, came and went in an instant sometime around midyear.

"After that, pfft, I have no idea" what happened, said LIU's Mr. Lala, summing up a consensus view that was more typically expressed with shrugs, head shakes, sullen looks and downward stares.

Supplementing bad market-pricing news overall with individual reports on various segments of the E&S business, our newsletters included headlines like, "Hard Umbrella Market Nowhere In Sight" and "Capacity Trumps All Other Issues Fueling Persistently Soft D&O Market."

Occasionally, we did deliver reports on the limited number of hard-priced sectors, like directors and officers liability for financial institutions and the aviation and energy markets. But even market participants in one of the hardest markets--Gulf energy--hit a stumbling block, we reported in the August edition.

"Gulf Energy Risks Ditch Cover As Buyers Balk At Price Hikes," the headline of that article read. "We scared a lot of clients into self-insurance by [requiring] huge premium dollars, where it might have been more intelligent...to focus on coverage," said Richard Brindle, group chief executive of Bermuda-based Lancashire Insurance, describing problems energy insurers encountered at midyear.

#6: A New Administration, A New Tort Environment

What the courts giveth, the other branches of government taketh away.

That might be an appropriate way to paraphrase the messages that EPL and fiduciary liability insurance experts delivered in the wake of what seemed like favorable court 2009 decisions for the defendants they typically cover.

"While employers may win the battle, they may lose the war on this one," Jack McCalmon, a partner with the law firm of Titus, Hillis, Reynolds, Love, Dickman & McCalmon PLC in Tulsa, Okla., said in an article leading off our June edition.

A day after a U.S. Supreme Court ruled in Gross v. FBL Financial that a worker has the burden to prove age was the key factor in a negative employment decision, Mr. McCalmon referred to the prospect for congressional action to overturn the pro-employer ruling in a continuing battle of one-upmanship between lawmakers and the court.

The Supreme Court decision was close, with a 5-4 ruling only slightly favoring employers, prompting strongly worded dissents from minority justices and immediate outcries from Congressional Democrats.

"The decision...reminds me of the court's wrong-headed ruling in Ledbetter. In fact, it was these same five justices who misconstrued an employment discrimination statute in that case," said Sen. Patrick Leahy, D-Vt., comparing the Gross ruling to the mid-2007 pro-employer decision in Ledbetter v. Goodyear Tire & Rubber Co.

The Ledbetter case, involving a 180-day limit for bringing employment actions over discriminatory pay decisions, prompted the first action by Congress after President Barack Obama was inaugurated. The president signed The Lilly Ledbetter Fair Pay Act into law on Jan. 29, clarifying that discriminatory pay decisions occur each time compensation is paid--essentially, with every paycheck.

President Obama's administration has already given clear signals that there will be a strong emphasis on the rights of employees, noted Aon's Mr. Slamar, drawing a parallel between the Ledbetter situation and political backlash emerging in an employee benefits case that has not yet been heard by the Supreme Court but is headed in that direction.

Although a favorable ruling for fiduciaries was affirmed by the 7th Circuit Court in an excessive 401(k) fee case known as Hecker v. Deere, Hecker plaintiffs have since filed a petition for a review by the U.S. Supreme Court.

In addition, U.S. Rep. George Miller, D-Calif., chair of the House Education & Labor committee, introduced the 401(k) Fair Disclosure & Pension Security Act of 2009, requiring greater disclosure of fees for service providers that offer investment alternatives for plan participants, Mr. Slamar reported.

(More details of the specifics of the original court case are contained in a separate article later in this edition, "Ponzi Scheme Cases On Deck After Recent Plaintiff Score On 401(k) Fee Case.")

Mr. Slamar noted that Rep. Miller had introduced similar legislation late in the Bush administration that did not gain much traction, predicting the outcome might be different with a new administration in place.

Sounding a louder alarm during the Professional Liability Underwriting Society international conference last month, Robert Hartwig, president of the New York-based Insurance Information Institute, predicted a looming tort crisis that he said started to take root two years before the 2008 presidential election.

"Once Congress turned Democratic in 2006, this was basically the date on which there would be no more tort reform for the indefinite future in the United States," Mr. Hartwig asserted. Now, "we're not even seeing protections of existing reforms," he said, alluding to the potential erosion of past class-action reforms.

"Innumerable legislative initiatives are going to be created that will provide opportunities to undermine existing reforms and to develop new theories of liability," he continued, referring to the potential for increased health care liability claims and emerging suits alleging that carbon dioxide emissions are pollutants.

Changes in the judiciary will "also move things in the wrong direction" for insurers, who are historically hurt by rising tort costs, he said--going on to predict "there will be a recognition of a tort crisis somewhere between 2012 and 2014."

For specialty market participants waiting for a hard market, there is one silver lining in Mr. Hartwig's prediction. At the outset of his presentation, Mr. Hartwig noted that no previous market turn had come without "a change in the perception of risk," which a "tort crisis" might presumably deliver.

"A precipitous drop in industry capital is not enough. You need a change in risk perception," he said, explaining why the market didn't turn following last year's capital nosedive. "A drop in capital is a necessary, but not a sufficient condition to get a hard market," the economist added.

#7: Old Players Reinvent Themselves

When we compiled our top-10 story list a year ago, we included a reference to 2008 profiles of five new competitors in the U.S. E&S and specialty lines markets that had roots in Bermuda.

In contrast to the list of new names like Montpelier US, Ironshore Insurance and Valiant Insurance, this year's crop of new players--if you can call them that--are some of the oldest names in the business.

The only two E&S company profiles in our newsletter were about existing players that are in the midst of reinventing themselves--Lexington Insurance (which is shaking off the American International Group banner to emerge under the Chartis umbrella), and CNA (where the E&S division has taken on a new brand as well, calling itself CNA Select Risks).

Leading the CNA team, industry veteran John Angerami said that putting a new label on the E&S business was just one small step in an ongoing building process.

During an exclusive interview published in our July edition, he went on to outline plans to double the number of wholesale broker partners and double the number of employees dedicated to the E&S unit--plans he's developed just three months after joining an insurer he believes has an unusually broad E&S appetite sitting within a retail organization.

More recently, Peter Eastwood, who heads up the nation's largest E&S insurer--Lexington--took a look back at the changes that have taken place at his firm since he took the helm on Dec. 9 last year.

"There's been an evolution in terms of our challenges," he said in the lead article of our October edition. "As we sit here today, I would tell you that our challenges are similar to the ones that others in the business face....Supply is greater than demand, and so we face competition in our business, followed very closely by the recessionary economy here in the United States."

"AIG and its issues that emanated from the liquidity crisis,...while still in effect for us as an organization [now known as Chartis] are really a distant third for us" at Lexington, he said.

Newer names in the business, like Ironshore, which is now led by Lexington's former CEO, Kevin Kelley, were by no means absent from our newsletters this year.

Representatives of two specialty divisions of Ironshore and one specialty division of newbie Torus, for example, revealed strategies to enter the umbrella liability market in our August edition.

#8: Is It Hotter In Here? Global Warming Litigation Brings Opportunities

Mr. Hartwig, speaking at the NAPSLO conference, joined a chorus of E&S/specialty market participants who pointed to "green umbrellas"--coverages for alternative energy sources, natural resources and environmental risks generally--as sources of opportunities for niche writers over the next few years. Several feature articles this year highlighted these growing sectors of the economy

In an August article, for example, Associate Editor Phil Gusman revealed that while writers of environmental liability insurance see threats ahead as they conduct business under an Obama administration expected to put more emphasis on heading off climate change, new insurable risks are also emerging.

New industries emerging to provide alternative energy sources, such as wind and solar power, create new environmental liability insurance prospects, while going green in construction and retrofitting of buildings opens up new markets for coverage, the article said. Even cap-and- trade initiatives could allow insurers to cover the validity of exchanges.

#9: Is This National Underwriter Or Entertainment Tonight?

While television shows like "Entertainment Tonight" and magazines such as National Enquirer and People were producing seemingly endless reports on the death of a pop icon and the divorce of two reality TV stars, NU did its part to explore the insurance implications of these events in two of the more widely read newsletter articles of 2009.

"Will Insurers Pay For Jackson's Concerts?" one article asked in a July report revealing that the sudden death of Michael Jackson might trigger one of the biggest event cancellation claims in the insurance industry's history.

Experts at the time speculated about details of a medical exam that could muddy coverage determinations for 50 sold-out performances that had been scheduled by the "King of Pop" at London's O2 Arena.

In the same edition, we reported on the "special brand of expertise" involved in writing insurance policies for reality television shows in the wake of news that the Gosselins--the stars of "Jon and Kate Plus Eight"--were divorcing. Emotion-based shows like that are harder to plan for than for shows involving strenuous physical stunts like "Fear Factor," experts advised.

#10: Brokers, Insurers Describe The Most Unusual Risks To Land In The E&S Market

A more general insurance report involving the entertainment world, "Event Insurers Still Play To Full Houses," in the September edition, revealed continued demand for insurance covering events ranging from bake sales to the Olympics, as well as some unusual activities in between--such as Velcro jumping event and Airsoft operations.

But those risks probably seemed like child's play to brokers and underwriters who responded to Associate Editor Phil Gusman's call for descriptions of the most unusual risks they wrote or placed.

His survey resulted in a September article headlined, "Alligators, Body Parts, Fantasy Leagues: All In A Day's Work For Specialty Writers," which described coverage for a 30-foot-tall lobster sculpture tourist attraction and a cattle stampede for a truck commercial.

It also detailed coverage for a former Major League baseball home run king's bum ankle--a policy that required the player to take a performance-enhancing steroid as a condition of coverage--not to mention coverage to protect fantasy football owners from season-ruining injuries to their fantasy team players.