When shareholders see their holdings fall rapidly and substantially in value, they will sometimes get together to sue company management.

And with so many companies losing huge chunks of their market value during the fall-out from the sub-prime mortgage crisis, the number of class action lawsuits is expected to soar.

It is not surprising therefore that demand for professional liability insurance - particularly directors and officers (D&O) and errors and omissions (E&O) cover - is also picking up strongly.

For insurers, there are real opportunities, but they come with high risks in the current economic climate.

IronPro, the New York-based professional liability unit set up last May by Bermuda-based insurer Ironshore, has ventured intrepidly into the market and has exceeded targets for premiums written in its first 12 months.

"We had a plan that would put us at about $35 million to $40 million at the end of the first year, and we are at or beyond that point now," IronPro president Greg Flood told The Royal Gazette. "I'm really pleased with the way things are going."

According to the Risk and Insurance Management Society (RIMS) Benchmark Survey released last week, D&O premiums fell 19 percent in the first quarter of 2008, according to evidence from corporate risk managers, further evidence of an insurance market softening across most lines of business.

But that trend is not manifesting itself in financial institutions lines - the area of the market most vulnerable to shareholders' class action lawsuits linked to sub-prime losses.

"The financial institutions (FI) market is changing dramatically by the day," Mr. Flood said. "Premiums were up about 30 percent in the fourth quarter of 2007 and they virtually doubled in the first quarter.

"Financial institutions is its own little world. Look at the first quarter this year when claims were up about 500 percent compared with the first quarter of last year."

Mr. Flood has specialised in the professional liability business for more than 25 years, including 17 years in leadership roles at American International Group.

As losses continue to be reported more claims will come in and Mr. Flood said he expects institutions to upgrade their cover as the environment becomes increasingly difficult.

"There's been a huge spike in securities class action lawsuits since the sub-prime crisis began to bite. And there are many financial institutions being sued.

"Some analysts have estimated that there will be $8 billion of insured losses in this sector. So rates have to go up."

Starting off in business in the middle of last year meant that IronPro was not saddled down with claims arising from old business - something that is sure to be weighing down some of its rivals.

"We're in very good shape that way," Mr. Flood said. "I'm very happy to be starting off with a clean slate."