Insurance reserves, shareholder litigation and SEC enforcement

Publicly held insurance companies are increasingly the target of shareholder actions and SEC scrutiny. Public insurance company executives and directors are acutely aware that announcements of material reserve deficiencies or strengthening can lead to collateral consequences including regulatory scrutiny, rating agency implications, goodwill impairment charges and potential breach of credit agreement covenants. Recent trends from the plaintiffs’ securities bar and the SEC suggest an additional concern: private securities litigation, SEC investigations, and shareholder demands and derivative actions.