Guy Carpenter Develops Industry�s First Frequency and Severity Model for Analyzing U.S. Publicly Traded Directors & Officers Liability Risks

Bookmark and Share

Designed to help underwriters determine loss potential of their D&O portfolios

NEW YORK, February 11, 2004 In response to insurance companies� need for more effective tools to manage their Directors & Officers Liability Insurance (D&O) portfolios for U.S. publicly traded companies, Guy Carpenter & Company, Inc. announced today the launch of the industry�s first model for analyzing and forecasting the frequency and severity of securities class action suits, which account for the majority of D&O insurers� loss activity. The new LEAD™ model (Loss & Exposure Analysis for D&O), developed in conjunction with Marsh & McLennan Companies subsidiary NERA Economic Consulting, is available for the exclusive use of Guy Carpenter clients and uses policy-level data to help insurers determine the loss potential of individual D&O policies as well as portfolios.

�Taking into account the historical difficulties in modeling this line of business, the LEAD™ model represents a significant step forward in analyzing D&O risks,� said Chip LaLone, Principal and head of Guy Carpenter�s worldwide D&O practice. �When used in concert with Guy Carpenter�s MetaRisk® model, our clients can better assess the reinsurance options available to them, calculating the tradeoffs between various strategies.� The MetaRisk® model is a proprietary dynamic financial analysis platform, used by Guy Carpenter clients to facilitate their reinsurance decision-making process.

The LEAD™ model brings together a wide range of publicly available data, including stock issuer characteristics, stock trading information, financial statement metrics and stock ownership breakdown, to calculate the likelihood that a portfolio company will face a future securities class action suit, as well as estimate the severity of the class action. D&O insurers will be able to use the LEAD™ model as a risk selection/avoidance tool to help analyze and manage shifts in frequency and severity within their portfolios, evaluate risk/reward of different attachment points, and supplement existing D&O reserving methods.

�The LEAD™ model was engineered through a collaborative effort between Guy Carpenter and NERA that spanned the past 12 months, leveraging our combined in-depth understanding of the D&O market,� said Dr. David Tabak, Vice President at NERA. �The result is a highly sophisticated model based on NERA’s proprietary database of securities class actions that can be used to analyze the D&O portfolios of Guy Carpenter�s clients in a uniform way, despite the fact that each is underwritten differently.�

For further information or a demonstration of LEAD™, please contact Nick Durant, Vice President, Guy Carpenter, at (215) 864-3600 or

About Guy Carpenter

Guy Carpenter & Company, Inc. is the world’s leading risk and reinsurance specialist and a part of the Marsh & McLennan Companies, Inc. Guy Carpenter creates and executes reinsurance and risk management solutions for clients worldwide through more than 2,400 professionals across the globe. The firm’s full breadth of services includes 15 centers of excellence in Accident & Health, Agriculture, Captive and Program Managers, Environmental, General Casualty,
Investment Banking*, Life & Annuity, Marine and Energy, Professional Liability, Property, Retrocessional, Structured Risk, Surety, Terror Risk, and Workers Compensation. In addition, Guy Carpenter’s Instrat® unit utilizes industry-leading quantitative skills and modeling tools that optimize the reinsurance decision-making process and help make the firm’s clients more successful. Guy Carpenter’s website address is
*Securities are offered in the United States through MMC Securities Corp., Member NASD/SIPC. MMC Securities Corp. is an affiliate of Guy Carpenter & Company, Inc.

About NERA

NERA Economic Consulting is an international firm of economists who understand how markets work. Founded in 1961 as National Economic Research Associates, its focus is on the practical application of economics to complex business and legal issues. Under the auspices of parent company Marsh & McLennan Companies, Inc., NERA operates with 500 professionals in 16 offices worldwide. NERA is part of Mercer Inc., one of the world’s largest consulting organizations. Together, the firms of Mercer Inc. have 14,000 employees in over 30 countries throughout the world. For additional information, please visit