Like free-spending consumers who saved scarcely a penny in the boom, companies can find their emergency provisions lacking in more testing times. Share prices on the up made for happy investors – and less need for insurance against stockholder lawsuits. Now, that protection is crucial. Securities litigation filings surged 26 per cent in the first quarter, according to insurance specialist Advisen. As a result, premiums for D&O insurance, which covers directors and officers if they are sued and is key to attracting heavyweights to a US board, are soaring for the crisis-stricken financial sector.

While D&O protection rates generally fell 2-3 per cent in the first quarter, the cost for financial companies rose more than 30 per cent. Insurers, already reluctant to write higher-risk financial policies, are tightening up further. Premiums must compensate for some $6bn in expected losses on subprime or crisis-related suits. Include coverage for errors and omissions, says Advisen, and losses could reach $10bn. Meanwhile, even the largest policies, at perhaps $800m, can be quickly gobbled up by legal fees before possible damages – especially when companies face multiple suits.