Post-IPO Volatility and Risks

Too often, in the rush of initial public offering (IPO) preparation, insurance placements – including directors’ and officers’ (D&O) liability insurance – take a backseat. However, liability risks can occur, especially in the first three years after an IPO. There can be a mistake or misrepresentation in the prospectus, corporate mismanagement, or misinformation during the roadshows. In the worst case, the resulting claims can jeopardize the continuity of your enterprise.

Distribution of Class Action Lawsuits Filed Within 3 Years of a Traditional IPO

Source: U.S. Securities and Exchange Commission (EDGAR); Stanford Securities Class Action Clearinghouse; Aon Analysis

14% of traditional IPOs between 2018 and 2021 underwent federal securities litigation. Of the 170 suits filed, 93% were brought within the first 24 months, and all of them were sued within three years.

Rethinking Your D&O Coverage Post-IPO

The marketplace for D&O insurance for companies 12 to 36 months post-IPO is increasingly competitive. As companies clear this period of hyperactive risk, D&O insurers are eager to offer coverage, often at a deep discount to existing premiums. These increasingly attractive terms reflect:

  • The statistical likelihood that a lawsuit is filed in the first 24 months post listing
  • High premiums and retentions paid at IPO

While the data is broad-based, D&O insurers review each company individually and consider the risk narrative to achieve the best cost and coverage results.

How Can Aon Help You Get Better Pricing for Your IPO D&O Insurance?

Aon has a proven track record of achieving competitive pricing and coverage improvements that are available in the years following an IPO. D&O specialists can provide a fresh perspective to ensure broad coverage and competitive terms using proprietary analytics. Our framework for analysis includes:

Board-Ready Data and Analytics

Benchmarking provides the foundation for evaluating program metrics. We use our real-time pricing metrics to have transparency into insurer pricing movement and trends. Our analysis goes beyond benchmarking and includes our proprietary claims database and actuarially based D&O Insight loss modeling.

Direct Global Access

Our worldwide network of offices allows for direct access to the global insurance industry without relying on costly and distant intermediaries to access important venues like London, Bermuda and Hong Kong.

ESG and Corporate Governance Advisory

Aon embeds a tailored ESG assessment into the D&O underwriting process. By conducting a current-state ESG assessment, we build a tailored board and executive education program for your company, leveraging the results throughout the D&O placement. By focusing upon, understanding, and differentiating a company’s legal, compliance, regulatory and financial reporting framework – among other IPO risks for companies – we can guide our clients through the evolving D&O marketplace.

Holistic Risk Approach

Aon’s experienced professionals help craft a compelling narrative for marketing success and secure risk transfer for a full suite of needs such as cyber, mergers and acquisitions, intellectual property and executive compensation.

Best-in-Class Coverage Terms

Aon takes a fully integrated approach to contract performance. Our brokerage and claims team are united in strategically translating what we see in claims to craft the language in our coverage negotiations.