Special Purpose Acquisition Company (SPAC) Risk Specialists
Learn more about how Marsh helps SPAC solve their risks and insurance needs during this recent panel co-hosted with Orrick.
The directors and officers of a special purpose acquisition companies (SPACs) face unique exposures and a direct risk to their personal assets as the funds held in SPAC trusts cannot be used to indemnify them. In the absence of a properly crafted insurance program individuals could be forced to dip into their own pockets to cover the defense costs and potential settlements as a result of a claim.
Protecting the personal assets of the board of a SPAC requires a deep understanding of the risks and liabilities faced by directors and officers of these companies as they raise capital, pursue a target, and ultimately complete their business combination. Marsh has assembled a team of specialists who can help SPACs quantify their risks, manuscript their coverages, and secure a policy tailored to their unique exposures.
Marsh’s SPAC Insurance Specialists have served as the insurance broker for 30% of the SPACs that have emerged from IPO in the last 18 months. Marsh is a leading insurance broker in this market, protecting more than $20 billion in SPAC assets.
Marsh’s SPAC clients rely on us to provide:
- D&O insurance policy terms that line up with a SPAC’s due diligence period.
- Proprietary SPAC peer benchmarking inclusive of pricing.
- Pre-negotiated tail coverage to cover claims against the SPAC brought after completion of a business combination.
- Claims advocacy in the event of a loss.
- Broad policy conditions including coverage for:
- Claims brought by prospective targets and PIPE investors.
- Alleged violations of the Securities Exchange Acts of 1933 and 1934, Dodd-Frank, and Sarbanes-Oxley.
- Investigations by regulators.
A record 428 federal securities class action lawsuits were filed in 2019 – the third consecutive year of more than 400 lawsuits. The 2019 filings drove more than $1 trillion in market capitalization losses. These lawsuits highlight the liabilities that SPACs and their directors and officers could face arising from:
- Representations made within IPO road shows, S-1s, and quarterly and annual filings.
- Due diligence and business combination proxy filings.
- Ongoing operations of post-combination entities.
Additional SPAC Solutions and Services
- Transaction risk
- Pre-acquisition insurance and risk management due diligence.
- Insurance capital solutions to address deal risks: representations and warranties, environmental, tax liability, successor liability, contingent risk, and other deal related solutions.
- Post-acquisition insurance placement and transaction related insurance needs: key person, claims-made run-off.
- Exit solutions that address legacy liabilities in strategic sales, bankruptcies, and initial public offerings (IPO).
- Portfolio-level risk
- Execution of pre-acquisition proposed savings using Marsh’s unique purchasing platform.
- Optimize costs across a portfolio of investments with portfolio buying approaches.
- Institute loss reduction strategies to drive down costs for life
- Deep industry knowledge
- More than 20 global gropus providing industry-specific experience and insights.
- Customized insurance and risk solutions for the post-close entity, ensuring a smooth transition from SPAC to operating company.
- Annual metrics based performance review.
- Cost-savings and liquidity strategies
- Value-added services
- Project finance, structured credit, and political risk.
- Enterprise-level risk optimization assistance (ERM).
- Oliver Wyman actuarial services.