IPO insurance protects your company and its leaders throughout the IPO journey.
Coverage for Your Public Offering
An initial public offering (IPO) is both exciting and risky. When you take your company public, your statements and actions are suddenly subject to a new level of scrutiny and regulatory oversight, and lawsuits are common. IPO insurance provides an extra layer of protection for your company and your executives.
Standalone IPO Insurance
D&O insurance can cover IPO-related risks, but this is not always the case. Some policies exclude IPO-related claims. In addition to ensuring that you have coverage for claims related to IPOs, it’s also important to secure insurance early in the process of going public to ensure that your IPO-related activities have coverage.
Purchasing standalone IPO insurance is another option. Also called prospectus liability insurance, IPO insurance provides coverage for claims stemming from the IPO. Combined with D&O coverage, this provides liability protection for the company and its directors.
Insurance for Companies Preparing to Go Public
When you take on investors, you also take on risks, which may require tailored management liability insurance solutions, including D&O coverage, tail coverage for executives, employment practices liability insurance, E&O, cyber, crime and more.
Frequently Asked Questions
Can my company wait until after the IPO to secure insurance?
No, it is not wise to wait until after the IPO to secure insurance. Although lawsuits may not emerge until after the IPO is complete, they frequently involve activities and statements that occurred in the lead-up to the IPO, so it’s vital to secure coverage for this period. A D&O policy purchased too late may have a retroactive date that excludes claims involving events before a certain date.
Will my company’s private D&O insurance cover IPO-related risks?
Maybe. Securing D&O insurance as a private company can be a smart way to lock in better rates. However, D&O insurance terms vary significantly from one policy to another. Some D&O policies exclude IPO-related claims. There may also be other exclusions that result in insufficient coverage, or the limits may not be adequate for the new level of risk that your company faces. NSI can review your coverage and needs and help you secure appropriate IPO insurance.
How can my company avoid IPO-related lawsuits?
IPO-related lawsuits often involve allegations of misleading statements or a failure to disclose risks, resulting in an overinflated stock price. Companies can reduce their risk by understanding their regulatory requirements and performing due diligence. However, there will always be some level of risk. If a company fails to meet expectations, shareholders may file a lawsuit alleging wrongdoing, even if you believe these accusations are unfounded, and legal defense can be expensive. D&O and IPO insurance provide critical protection.
Can I be held personally liable as an executive?
Yes, executives can be held personally liable for their statements and actions. It is extremely common for individual directors and officers to be named in litigation. Shareholders may also file a shareholder derivative lawsuit in which they sue the directors and officers on behalf of the company. In addition to performing your duties with care, you can protect yourself as an executive by verifying that the company has sufficient IPO and D&O insurance in place, with strong Side A and tail coverage.
