Bloomberg – Bernard Madoff’s alleged Ponzi scheme may cost insurers who cover financial institutions more than $1 billion as they pay legal costs for investment managers who gave client money to Madoff, an industry executive said.
Insurers who sell such coverage never expected, or charged their clients, for the possibility of investor losses in such a massive fraud, said Greg Flood, the president of the management liability practice at Ironshore Inc., the Bermuda-based insurer.
“This isn’t supposed to happen in America,” Flood said. “There will be extraordinary losses paid for this year.” About $1 billion in claims costs industrywide “wouldn’t be too difficult to imagine.”
