According to a survey by the broker, the average price in the second quarter for all sectors was down 18 percent from last year. While mortgage lenders are getting bigger bills from their insurers, prices have been falling for more than three years and declines will probably continue into next year, found Jennifer Fahey, a managing director at Aon.
Fahey, a 20-year veteran in the directors and officers (D&O) insurance business, says “It takes very extreme circumstances for the industry to turn when it’s in the portion of the cycle that we’re in now.”
Fahey says insurers have reduced D&O premiums as profit margins widen and the threat of claims lessens. In the face of growing concern over rising home loan defaults, insurers are likely to see lawsuits from shareholders of mortgage lenders that have lost at least $17 billion in market value, she notes, as well as lawsuits aimed at companies that traded subprime-linked securities.
The largest D&O insurance providers in the U.S. are American International Group Inc. and Chubb Corp.; biggest among insurance brokers are Marsh & McLennan Cos. followed by Aon, according to industry rankings.