The number of lawsuits stacking up against primary and secondary mortgage markets which are generating Directors' & Officers' (D&O) and Errors & Omissions (E&O) claims as a result of the sub-prime crisis has reached almost 200, according to Advisen.

The insurance research and analysis company, which provides an insight into underwriting, marketing and purchasing commercial lines, said its MSCAd large loss database listed 193 such cases against lenders, real estate investment trusts, homebuilders, commcercial and investment banks, bond insurers, rating agencies and others involved in the loan origination and securitisation process.

Meanwhile, D&O and E&O policies covering financial institutions, real estate appraisers, auditors and lawyers will bear most of the losses, while fiduciary liability policies, partnership liability policies and credit risk insurance policies may also be exposed, claimed David Bradford, editor-in-chief at Advisen, writing in the Insider Quarterly insurance magazine. He said that the financial impact of the fall out on insurers was likely to be painful, but not cataclysmic, with the sub-prime meltdown accounting for a $3.6 billion loss to the D&O market, according to forecasts.

"More than one-third of the sub-prime suits filed to date may trigger coverage under D&O policies," he wrote.

"Based on historical securities class action suit dismissal and settlement patterns, Advisen forecasts sub-prime securities class action settlements and related defence expenses of between $7.8 billion and $9.6 billion, with an expected value of $3.6 billion.

"This projection accounts for only securities class action suits and related low costs, and ignores shareholder derivate suits and other suits that may be covered under D&O policies. However, these suits are not expected to contribute materially to total losses.

"Sub-prime losses should add approximately 30 percentage points to the 2007 and 2008 accident year D&O loss ratios."

He reckons that the amount of lawsuits that could potentially trigger coverage under an E&O policy still appear to be manageable, while many hedge funds and larger financial institutions may not have bought coverage or have very large self-insured retentions, and it is likely that numerous suits will invoke coverage limitations and policy exclusions.

Furthermore, Mr. Bradford believes sup-prime related D&O losses will not be evenly distributed across writers of that particular insurance, with Advisen's Programme Benchmark database revealing that the top 10 writers of financial institution D&O accounting for 77 percent of the market, and the top three making up almost 50 percent of the total premium volume written.

Elsewhere, financial institution E&O writers show a similar concentration of risk, with the top 10 writers accounting for 80 percent of the total premium written and the top three having more than 50 percent of the market share.

Mr. Bradford said that the property casualty insurance sector was "besieged on all fronts" by the losses incurred from the sub-prime mortgage crisis.

"The tidal wave of mortgage defaults is largely limited to the US, but its impact is felt across the globe," he wrote.

"Swiss Re reported a sub-prime-related loss of $1.1 billion from credit default swaps. Bermuda-based XL Capital Ltd. wrote off a sizeable investment in a bond insurer.

"Concern is mounting that what has been sporadic 'surprise' announcements of writedowns in 2007 and early 2008 will become increasingly routine as the year progresses."

He claimed that among the causes of losses to the 131 companies reporting write-downs were investments in mortgage lenders, hedge funds, bond insurers and other companies damaged by the crisis, with XL Capital one of the many who reported such a loss at $1.06 billion in the fourth quarter when it wrote down a stake in bond insurer Security Capital Assurance, and RenaissanceRe announced it would take a $126.7 million charge to writedown its total investment in ChannelRe, a reinsurer that provides coverage exclusively to bond insurer MBIA. Rival Partner Re, meanwhile revealed it was writing off its $74 million investment in ChannelRe.