The extradition of three British banking executives to the United States over fraud charges stemming from the downfall of Enron should not immediately impact the price of directors and officers liability insurance, according to Aon brokerage.

On Monday, after a four-year effort, authorities cleared the final legal hurdles needed to extradite former bank executives Gary Steven Mulgrew, Giles Robert Hugh Darby and David John Bermingham, all in their mid-40's, to a U.S. Federal Court in Houston.

The trio face charges of allegedly defrauding NatWest Bank of $7.3 million in a scheme engineered by them and executives at Enron.

They are accused of conspiring with executives from Enron in 2000 to trick the bank into selling its interest in an Enron subsidiary for $1 million to themselves and reselling it for $7.3 million, pocketing the profit.

According to Adam Codrington, executive director with insurance broker Aon's Professional Risks unit in London, while this incident may cost insurers under their directors and officers coverage, it should not result in premium increases.

"It would be an overreaction if insurers looked to raise the price of D&O cover or charged extra to cover the threat of extradition, but buyers will need to pay increased focus to their policy wordings," he said in a statement.

He noted that for the insured, it is important they be satisfied with the language of the policy and for senior executives to be especially certain they have access to it after they have left the company.

A policy, in the event of an extradition proceeding, should pay all reasonable defense costs in opposing the extradition proceeding, provide legal representation during the bail process, and cover all reasonable defense costs during trial until a verdict is rendered, according to Mr. Codrington.

Interviewed by National Underwriter, Mr. Codrington said many clients, in light of the extradition, have called asking for clarification of their coverage. He said to date all reviews have found that D&O coverage in place would cover legal extradition proceedings and related defense costs.

He argued that for insurers, it would have particularly negative implications if they were to suddenly write exclusions into their policies in reaction to this incident.

"This is a great opportunity for insurers to show that D&O responds to the personal concerns and considerations of the insured," he said.

The action against the three former executives has met strong public criticism, he noted. What has particularly riled the public in the United Kingdom is that the extradition treaty being used was intended to extradite terrorists and not white-collar criminals.

There is also criticism in the United Kingdom that the treaty is not reciprocal, he noted. He added that it was his understanding that under previous extradition treaties the three would not have been extradited.

The executives are expected to arrive in the United States sometime early next week.

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Bankers' Extradition Should Not Raise D&O Premiums

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