The ripple effects from the recent financial meltdown have been felt across all sectors of the economy. However, its effects have been most profound on the three sectors most involved: accounting, real estate, and the financial services sector. In the financial services sector, banks have been specifically noted.

These three primary areas will be examined in “The Impact of the Financial Crisis on Accounting and Other Professions” panel discussion at the 23rd Annual PLUS Conference. Panel moderator, John Iannotti, vice president, Financial Institutions, Everest Reinsurance Company, indicates that the discussion will center on the effects of underwriting these types of risk “in light of the passage of the Dodd/Frank bill.” While there still are many unknown issues surrounding the new bill,” says Iannotti, “we do know that it will require dozens of new mandatory rules, by a wide variety of federal regulatory agencies.” As such, he notes this will result in the bill, for the most part, being a work in progress.

Iannotti states that much of the presentation will chat about “just how very difficult it is to underwrite a risk with the types of unknowns” presented by this legislation. Large banks, for example, will now be required to monitor and report on the systemic risk they create. In order to be able to sign off on the financials, accountants will need to determine if the process is in compliance with the new law. He notes, “This creates significantly more risk for the accounting professional.” At this point in the process, no one is even sure what qualifies as appropriate implementation, thus opening the accountant up to potential future claims.

The real estate industry is not exempt from this wave of new legislation either. Real estate brokers must be concerned about a new consumer protection bureau, says Iannotti. This bureau, which is funded by the Federal Reserve, “will be aggressively applying a variety of new rules and regulations.” Specific details of the new law are still being worked out. However, what is known is that there will be massive new requirements and disclosures within the mortgage industry that brokers will have to comply with.  

The panel will also discuss current claims trends which are running counter to the present soft market pricing in the rest of the property and casualty market. In fact, Iannotti points out, E&O and D&O claims are increasing at an alarming rate. He indicates that 2009, for example, had double the number of claims of the prior year. And he notes, “There are many more in the pipeline.”

Increasing claims activity typically results in increases in premium. However, it is not quite that simple in the current situation. “It is extremely difficult to underwrite a risk with so many unknowns. The major concern is the exact effect of the new regulations, and how rates should be established,” Iannotti says. He adds that, without a doubt, it is this unknown that is the “wild card” in this whole situation, but his panel will be bring the latest information to attendees. Based on the best current data, he says, “Under­writing these lines of coverage is not for the faint of heart.”