According to the Economist, the Dodd-Frank act, America’s new law to reform the oversight of financial institutions, has spread anxiety among Wall Street execs. But it is proving good news for their insurers, for whom it has created a new line of business. It has taken until this month for the Federal Deposit Insurance Corporation (FDIC) to finalise new rules, based on powers it gained under Dodd-Frank, that allow it to claw back up to two years of pay and bonuses from senior executives and directors deemed to be responsible for a financial firm’s failure. But insurance against such an event has already been on the market for three months.
In April, Marsh, a big insurance broker, said it would start offering policies that would cover financial firms against both their legal costs in the event that they underwent investigation by the FDIC and any compensation that their execs had to hand back as a result of action by the agency. Mark Cuoco, an executive at Marsh, says they realised that the provision for pay clawbacks was making Wall Street executives especially nervous, so it made sense to create a product that explicitly covered them against such a risk. Marsh says dozens of financial institutions, from bank holding companies to hedge funds and private equity firms, have taken out its cover, as an add-on to their broader “directors and officers” liability insurance. …
Read more at http://www.economist.com/blogs/schumpeter/2011/07/dodd-frank-and-executive-pay
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