Madoff Lawsuit Virus Likely To Spread To Insurance

Madoff Lawsuit Virus Likely To Spread To Insurance - 1/30/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

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Madoff Lawsuit Virus Likely To Spread To Insurance
Evan Weinberger

Securities Law 360. January 30, 2009
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EXCERPT: Bernard L. Madoff's alleged $50 billion Ponzi scheme has investors searching for cash anywhere they can find it and investment advisers, banks and hedge funds running for cover. When those initial claims are settled, litigation with insurance companies over paying the defrauded will just be gearing up. But even with dozens, possibly hundreds, of lawsuits filed around the world already, the litigation surrounding Madoff's fraud will pick up even more as holders of directors and officer and errors and omissions policies seek help from their insurance companies – […] According to Aon Benfield, an insurance risk and capital management advisory firm, the maximum exposure insurance companies could be facing is $6 billion, although the firm expects the claims to come in at a smaller range of $760 million and $3.8 billion. “These figures represent material costs, but are not likely to have a significant impact on the insurance industry,” said Stephen Mildenhall, head of Aon Benfield's Actuarial and Enterprise Risk Management practice. Those numbers appear fairly tame given the massive fraud Madoff is accused of perpetrating. Kevin LaCroix, a partner at OakBridge Insurance Services and author of the blog DandODiary.com, said that is because until recently, investment advisers and other financial firms were “reluctant buyers” of the directors and officers and errors and omissions policies that will come into play in this case. The firms that are currently facing lawsuits have long thought they did not need coverage, and that the coverage that was available was too expensive. “For years and years, it was really hard to get these kinds of companies to get insurance at all,” LaCroix said. Large D&O policies will have limits of up to $300 million, according to Baker. Most investment firms don't have policies with limits that large, he said.

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