Sub prime crises may cause insurance and reinsurance industry 'marketing altering' losses
14 November 2007
The insurance and reinsurance industries will face potentially 'market altering' losses from the sub prime crisis, explained Arthur Washington, partner of New York firm Mendes & Mount LLP at a seminar today, hosted by business law firm LG.
In a packed seminar at Lloyd's today, delegates heard that the professional indemnity and the directors and officers classes are likely to be hardest hit.
Speaking at the seminar, LG reinsurance partner William Sturge commented: "The insurance exposure comes down to two main areas: claims based on the relaxation of lending criteria and claims based on defective investment strategies involving investment in bonds backed by a toxic element of sub prime mortgages."
"A feature of the sub prime issue is that it is multi-directional," adds Sturge. "Firms that had nothing to do with the sub prime lending industry can still have huge exposures, merely from investing in the bond market."
Arthur Washington, presenting a paper on the sub prime-related class actions already commenced in the US, said: "This has the potential to be a market altering set of losses. But we will not have a clear view of total exposures until at least year end 2008".
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