Identify Damages, Evaluate and Assess Limits (IDEAL): D&O Statistical Analysis Model

Recognizing the exposure that directors and officers have to securities class-action litigation, Marsh’s FINPRO Practice and Marsh Business Analytics (MBA) created IDEAL—Identify Damages, Evaluate and Assess Limits. This dynamic limit and retention decision-support tool uses advanced frequency and severity analysis to help companies evaluate the structure of their directors and officers liability (D&O) programs.

Support for insurance purchasing decisions

IDEAL is designed to provide decision-making support when evaluating publicly traded D&O liability insurance limits. It is built upon two databases:

• S&P Capital IQ’s database of 7,500 companies traded on the US national stock exchanges.
• ADVISEN’s database of more than 2,100 securities class-action settlements.

Who it's for

• All US publicly traded companies, regardless of size or industry.
• Companies that want to improve their decisions by making the most strategic use of a variety of data.
• CFOs, treasurers, and other finance executives who want to thoroughly understand risk—including its volatility— and its implications for their organizations.
• Risk managers who want to incorporate data and analysis into their insurance and risk management program strategies and budgeting.

What you get

• Data-driven support to inform your decisions about risk management and insurance needs.
• Analyses geared to your industry and your firm.
• Support for negotiating positions in the insurance marketplace.

Using actuarial and statistical regression techniques, IDEAL provides clients with a full distribution of securities class-action settlement amounts derived using client-specific independent variables, including market capitalization, industry, beta, trailing price/earnings (P/E) ratio, and total assets. As a result, IDEAL allows our clients to:

• Quantitatively examine the susceptibility of securities class-action litigation.
• Suggest hypothetical shareholder class-action settlement values based on specific client inputs.
• Increase awareness of potential sources of claims.
• Enhance knowledge of the D&O litigation environment, the primary driver of D&O rates.

Ideal Sample: Predictability

IDEAL considers a range of inputs as it looks at questions, for example about the predictability of lawsuits: What is the probability that the company will face a securities class-action over the next 12 months?