Following the meltdowns of Enron and WorldCom, "the A-market really exploded," Mr. Flood said, recalling a time when directors began worrying about the potential to face personal liability at the same time as full D&O A-B-C policy limits were being eroded at troubled companies.

The "A" coverage part of a full D&O A-B-C policy and the separate Side-A policies that began to proliferate during the last decade both respond to non-indemnifiable D&O losses—in other words, losses for which a corporation can't indemnify directors because of statutory prohibitions in a state, because the corporation is financially impaired, or some other reason.

Separate Side-A policies can provide added limits for certain groups of directors above the coverage of an underlying A-B-C policy and may provide drop-down coverage or carry fewer exclusions than A-B-C policies.

Since the Side-A policies came on the scene during the last decade, the market has "grown pretty much exponentially," Mr. Flood observed, while Mr. Rafferty speculated that there might be 60 carriers now offering the coverage.

In the years between the Enrons and WorldComs and the credit crisis, however, Side-A policies were not really called upon to respond to losses, Mr. Rafferty said.

"We've seen panels like this talk about this in theory for years"—that the losses would come—"and now finally we're here," he said, highlighting recent settlements of shareholder derivative cases, including a $75 million case against pharmaceutical giant Pfizer, which was covered by the Side-A carriers.

Mr. Rafferty went on to admonish D&O insurers for failing to keep Side-A coverage pricing at levels adequate to cover the derivative-suit losses and claims related to corporate bankruptcies.

This "has been the best subset of the business…for all constituents, [including] the underwriters, the reinsurers, the buyers and the brokers," he said. Reviewing the good run the policies have had for these groups, he noted that Side-A:

• Gives a tremendous amount of comfort to the buyers.

• Has been welcomed by brokers because it is generally a new product for them to talk to insureds about.

• Represents a part of a primary carrier's portfolio that has been easy for reinsurers to model, thereby helping insurers get better reinsurance terms and pricing.

"I think we were all fat, dumb and happy around Side A," Mr. Rafferty concluded. "It was fairly easy to write that product to a minimal if not nil loss ratio year after year if you avoided failures—and there weren't any failures," he said.

That was before the global financial crisis and the economic downturn.

"Now, we have been in an environment where there are hundreds of corporate bankruptcies. So not only is that portion of the equation harder—that's a tougher bullet to dodge—but now you've got solvent companies that might have derivative settlements that are tens if not hundreds of millions of dollars, all while we just crushed the pricing," he said.

Mr. Flood said there are "certain industries that don't deserve a break on anything" related to D&O coverage, including Side-A policies, referring specifically to financial institutions that had to be bailed out by the federal government.

Going back in history, he reviewed bank failures during the Savings & Loan crisis in the 1980s. "The federal government had to intervene. The Resolution Trust Corp. was formed. The bad assets were assumed by the government. The good assets were put back out, and the government declared that they were going to have a much higher level of regulatory alignment with the risks of the banks and that this was a once-in-a-lifetime event," he said. "It was the first time since 1930" that anything like the S&L crisis had happened.

Fast forward less than 30 years later, "and we have something that is so spectacularly [messed] up that it takes the entire global economy down and has a level of intervention that exceeds anybody's wildest imagination," he said, referring to the downfall of investment banks as a result of the subprime meltdown and credit crisis.

"And what happened to the benefit of the D&O market?" he asked. "The government took [some of the] blown-up companies and rolled them into healthy ones, and the Side-A contracts never paid out," Mr. Flood said.

"Think of what would have happened if Merrill had gone down, if Bear Stearns didn't get rolled into Chase. Just start rolling them off in the back of your own mind. They are big, big dollars," he continued.

"We got really, really lucky, and if we're stupid enough to ignore that fact and price ourselves into the ground until the next one comes around and we're wiped out, it's our own fault," he concluded. "The evidence is in front of us."

Mr. Rafferty offered some arithmetic to make a similar point.

"If every facility would go and just isolate [and] look at your Side-A book, look at the limits you have exposed, if you have any sizable book at all, that number is in the billions," he said, advising the underwriters to then compare that exposed-limits figure to the total premiums they're collecting on the same policies. "It's not that much. Start doing the math," he said.

He noted that there's only a 5 percent subset of the industry, representing the toughest D&O risks, that pays $100,000 per million of limit for Side A. "If you carve that, then really what you have left is a book of business that might be priced at five grand per million," on average, he said. "How many of those risks do you have to write to fund one loss? 225? 250? 275? And is that really realistic?" he asked.

"I have a concern that this wonderful part of our business, we're just crushing," Mr. Rafferty concluded.