19% rise in class-action lawsuits, mainly in financial services

Towers Perrin and Cornerstone Research have warned that the financial crisis could cost insurers $6bn on D&O policies for US firms, the FT reports.

The FT says:

  • 210 securities class-action lawsuits were filed last year, a 19% increase over 2007
  • Almost half of the litigation activity in 2008 involved financial services companies
  • There have been rising settlement costs for class-action suits
  • $6bn of payouts possible, according to Advisen

David Bradford, executive vice president of Advisen said: "You don't have to go very far before there are disputes on how to allocate limited assets of a policy between insured parties."

Mounting claims and contract disputes over D&O policies in financial services have led to higher premiums, tighter policy terms or refusal to cover companies with large exposure to subprime mortgages.