Marsh launches D&O enhancement for IPO clients

Marsh announced a new investment bank indemnification coverage to its directors and officers liability insurance offering for clients pursuing initial public offerings.

While standard D&O insurance policies protect the company and its directors and officers from the costs associated with shareholder lawsuits, the coverage does not extend to investment banks, which prepare the companies’ prospectuses and facilitate the issuance and sale of their shares to the public. Instead, IPO companies agree to indemnify the banks against certain legal claims that may arise post-IPO.

Marsh’s data shows that investment banks are named as additional defendants in about 20% of all IPO-related shareholder class action lawsuits filed each year and nearly all lawsuits alleging a material misstatement or omission in the prospectus or registration statement.

To address this gap, Marsh collaborated with D&O insurers to develop a tailored policy enhancement to clients’ traditional D&O programs that specifically covers their indemnification obligations to investment banks.

“The journey from private to public company is fraught with significant exposure, including the potential financial exposure from indemnification obligations to investment banks, which can cost IPO companies millions of dollars out of pocket. With this new coverage enhancement, Marsh is able to provide clients pursuing IPOs with a best-in-class D&O insurance placement that reduces operational costs and better safeguards their balance sheet during critical growth stages.” – Andy Matthews, a Vice President in Marsh’s FINPRO Practice.