In the midst of a crisis, buyers of property-casualty insurance will want more coverage for their increased potential exposure, but some insurers may become reluctant to sell it because of the increased perception of risk.

According to insurance brokers, such sentiments are now evident in the markets for director and officers liability insurance and errors and omissions coverage for hedge fund and private equity managers, in the midst of economic turmoil gripping the financial sector. However, the emergence of the current situation is not affecting both equally simply due to the different nature of the two types of vehicles.

The major difference is that hedge funds do not take an active role in the management of a portfolio company like private equity investors do, said Michael J. White, senior vice president, financial institutions industry leader of the Executive Risks practice of Willis HRH, a unit of Willis Group Holdings.

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