Insurance styles of the rich and famous - protecting their assets

Personal insurance is up and liability sales are booming

Dec 7, 2008 @ 12:01 am

By Darla Mercado

Though the third quarter has been a bleak one for most insurers, the affluent continue to buy elite coverage for themselves and to protect their assets from others.

Carriers that provide personal line coverage for jewelry, yachts and mansions say that business is still good, even though signs point to an upper class that's less than sanguine about the economy.

For instance, the Chubb Group of Cos. wrote some $995 million in personal insurance during the third quarter, a 2% gain from the year-ago period. That unit of the Warren, N.J.-based insurer covers yachts, jewelry and personal liability, said Jim Fiske, vice president of Chubb.

In addition, interest in personal liability coverage insurance to cover affluent individuals in the event of a lawsuit has increased in the last few years, he added.

"We're definitely seeing an in-crease in higher limits of liability," he said. "We can do up to about $100 million in personal liability, which isn't a common occurrence, but it's not unheard of."

Anecdotally, some insurance executives say that people are more likely to sue for personal liability in a down economy, though the suits aren't numerous enough to be statistically significant.

For instance, the most affluent clients may have household staff or a business, and they could face pressure to lower expenses and cut employees when the economy gets tough. However, those clients could be facing a liability claim if a former worker comes back with a suit against the employer, Mr. Fiske said.

"There's no doubt that discretionary spending is down, but the liability exposures of the more affluent won't decrease because the spending has decreased," said Derek Ross, vice president of CM Meiers Co., a Woodland Hills, Calif., insurance brokerage.

The firm specializes in the entertainment industry, providing coverage for film and television productions, as well as high-net worth clients. Customers have been stepping up their umbrella insurance, which is intended to go above the liability protection covered by homeowners', auto and marine coverage, in excess of $5 million or $10 million, Mr. Ross said

"I think we're dealing with a savvy insurance customer, individuals with assets that need to be properly insured," he said. "We may not see an increase in people adding additional vehicles, but we will continue to see increases in liability coverage."

Demand for excess liability coverage is still high for AIG Private Client Group, a high-end property/ casualty subsidiary of New York-based American International Group Inc., according to Charles E. Williamson, president of that unit.

Types of requested coverage have varied from excess liability insurance for an 800-person Republican shindig to protecting a mansion and the art collection within from wildfires, he said.

Alliances with advisers and financial planners have helped agents and carriers reach out to high-net-worth clients in order to provide that additional backup. "For most agents, the first line of defense is the adviser," Mr. Williamson said. "Advisers would rather talk about insurance as wealth protection."

Some carriers, including Madison, N.J.-based Ace Private Risk Services, a unit of Ace Group of Cos. of Zurich, Switzerland, say that more agents are reporting more inquiries from clients, requesting reviews of their coverage.

On the other hand, advisers observe that clients often overlook the amount of liability insurance their clients need, and the clients are rarely the ones to bring up the topic in the office.

"As the years go by, personal liability umbrella coverage is most often overlooked and not taken care of," said Scott Ford, president of Cornerstone Wealth Management Group in Hagerstown, Md., which manages $150 million.

Often, the agent who sells the liability coverage is a member of the team when the firm formulates a financial plan and reviews coverage needs.

"You can be doing the right things with your investments and have your long term care and estate planning taken care of," he said. "But if you're sued, you may not have enough protection to cover yourself."

E-mail Darla Mercado at dmercado@investmentnews.com.

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