How do you know if the insurance packages being marketed to you are the right fit for your Initial Public Offering? At Crucial Insurance, we pride ourselves in our proactive and transparent approach to IPO Insurance advisory.
Every IPO is unique and highly complex, and as such deserves the attention of a qualified, experienced broker who works for you, and not an insurance company that may not have your unique circumstance in mind. Having worked with clients across every step of the IPO journey, we have extensive experience in both traditional and complex insurance structures both locally and abroad.
Initial Public Offering (IPO) Insurance, or Prospectus Liability Insurance, can provide you, the Directors and company protection against any claims rising as a result of your company going public.
Your company is exposed to numerous risks before, during and after an IPO. The first few years after going public could be the most tumultuous, and as such it is vital to have the right safeguards in place for every IPO milestone.
Every IPO incorporates several complicated, moving parts. As such, numerous mishaps could occur before, during and after an IPO, such as:
Claims during the IPO process can come from a number of sources, including:
Initial Public Offering Insurance can safeguard you against the above claims. Further, having the right insurances in place prior to an IPO is favourable to investors.
There are a number of options you will need to consider when insuring against liabilities which can rise from an IPO:
Stand-alone IPO Insurance, also known as Prospectus Liability Insurance or Public Offering of Securities Insurance (POSI)
This policy provides cover for claims arising from the initial float of shares on to a publicly share traded exchange such as the Australian Stock Exchange (ASX).
This includes activities associated with IPO such as the investor roadshow and Prospectus document. The policy period can be greater than 12 months and can extend up to 7 years.
The advantage of the stand-alone IPO insurance is that it ring fences the IPO exposure from the annual Directors’ & Officers (D&O) Insurance policy, which can prove a more cost effective solution in the long term. Most D&O underwriters view the IPO exposure as the company’s most significant one when starting out as a publicly traded entity.
By taking out a stand-alone IPO insurance, the exposure is ring-fenced and the annual D&O Insurance policy can be free of the IPO exposure moving forward. One significant advantage of this is that over the longer term, the savings achieved under the annual D&O can outweigh the initial upfront premium from the stand-alone IPO insurance.
In the current market, many Directors & Officers Insurers are not prepared to offer stand-alone IPO Insurance together. The reason is they do not want to expose their portfolio to an incident which may give rise to a claim under both policies and therefore have two separate limits of indemnity exposed.
As a result, insurers who are still prepared to underwrite publicly traded companies with recent IPO exposure will extend the D&O policy to cover specific IPO exposures under a combined limit of indemnity. This will be added via endorsement to the D&O policy and will be for specific coverage such as claims arising from the Prospectus document.
Under the Directors & Officers policy you will also need to consider the forms of coverage available. These can be as follows:
Side A & B are the more traditional forms of cover offered under standard Directors & Officers Liability insurance. Side C is much more difficult to obtain with very few underwriters prepared to offer this form of coverage. Side C premiums are very expensive and self-retention limits six figures and above.
Directors are exposed to a number of risks on a daily basis, and these risks will only increase after an IPO. Directors and Officers Insurance aims to protect directors against such risks, such as during circumstances when a director is required to pay legal defence costs, penalties, fines, various forms of compensation and more.
If you’re considering an IPO, talk to us today about how we can help protect you and your business from the risks associated with transitioning from a private entity to a public entity.
Tony Venning’s experience includes board level representation with major international broking firms, such as senior executive positions in London, Sydney and Melbourne.
Tony's insurance broking experience extends to working with high profile organisations such as the AFL and Cricket Australia and multi-national organisations with global exposures, including publicly listed organisations and companies undergoing an IPO. One of his key achievements includes resolving the public liability crisis sports organisations faced following the collapse of HIH.
Tony enjoys very strong relationships with the major Australian-based insurance companies and overseas markets, including Lloyd’s. Through these relationships he has developed innovative insurance products and services that provide clients with real benefits.
As multi-award-winning business insurance brokers, we have experience in working with companies in all stages of the IPO process. Whether you’re in the early stages of an IPO or are now running a publicly listed company, we have the expertise, insurer networks and infrastructure in place to help you achieve favourable insurance outcomes for your IPO.
We are also an AFSL licensed insurance broker. This means we are regularly audited to ensure that we offer an exceptional level of service and integrity. We also have the expertise required to provide advisory on IPOs.
Be readily equipped during all stages of the IPO journey. Contact us to speak to discuss your IPO Insurance needs today.