Shaky Banks Face Limits on Insurance Coverage for Suits, Probes

With public confidence in the banking sector shaken, cautious insurers are moving to reduce coverage for banks and their executives to limit their exposure to pricey litigation and regulatory penalties.

Director and officer insurers are finding themselves in the thick of the recent banking collapses because they cover exactly what problematic banks are experiencing: securities class actions and regulator investigations. Banks, as well as venture capital and private equity firms, should expect tougher questions on risk management, higher insurance premiums, and lower coverage limits as they get into the D&O renewal season this spring, insurers and brokers say.

Eileen Yuen, ...