At certain times, however, using experience as a guide to pricing is not only useless, but actually dangerous. Late in a bull market, for example, large losses from directors and officers liability insurance (“D&O”) are likely to be relatively rare. When stocks are rising, there are a scarcity of targets to sue, and both questionable accounting and management chicanery often go undetected. At that juncture, experience on high-limit D&O may look great. But that’s just when exposure is likely to be exploding, by way of ridiculous public offerings, earnings manipulation, chain-letter-like stock
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