Writers of professional liability insurance for hedge funds facenew vetting challenges in the wake of both the Amaranth scandal andfailed regulation efforts, warned one industry attorney.

But with a market penetration estimated at less that 20 percent,such writers still say the main challenge they face is persuadingtheir clients they need the coverage.

Richard Bortnick, a partner at the New York-based firm of CozenO'Connor, said a spate of shareholder suits has already arisen inthe aftermath of the estimated $6 billion loss by Amaranth AdvisorsLLC.

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