US companies undergoing IPOs are facing a threefold increase in directors and officers (D&O) insurance premiums over the past three years to cover lawsuits from investors claiming they were misled. The average annual premium for an IPO is now $US1.3m, up by more than 50% since 2009, according to data compiled by Thomson Reuters. Insurers are cutting coverage limits, requiring IPO clients to cover litigation costs before their policies are triggered and holding companies accountable for a percentage of any eventual loss, according to Beazley.
US companies undergoing IPOs are facing a threefold increase in directors and officers (D&O) insurance premiums over the past three years to cover lawsuits from investors claiming they were misled. The increases are in response to a 2018 US Supreme Court decision that allowed securities lawsuits to be filed in both state and federal courts, and in reaction to the rising frequency of IPO-linked securities class-action cases. Insurers are cutting coverage limits, requiring IPO clients to cover litigation costs before their policies are triggered and holding companies accountable for a percentage of any eventual loss, according to Beazley.