Special Purpose Acquisition Company (SPAC) Risk Specialists
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. Marsh’s SPAC clients rely on us to provide:
- Proprietary SPAC peer benchmarking inclusive of pricing.
- Broad personal assets protection coverage.
- Coverage for alleged violations of the Securities Exchange Acts of 1933 and 1934, Dodd-Frank, and Sarbanes-Oxley.
- Coverage for investigations by regulators.
- Policy terms that line up with a SPAC’s due diligence period
- Pre-negotiated tail coverage to cover claims against the SPAC brought after completion of a business combination.
- Coverage for indemnity owed to sponsor entities and underwriters named in suits.
- Coverage for claims brought by prospective targets and PIPE investors.
More than 400 federal securities class action lawsuits were filed in both 2017 and 2018. The 2018 filings drove more than $1 trillion in market capitalization loses. 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.
Our SPAC Solutions and Services
- SPAC-Level Risk
- Risk financing optimization at the SPAC level.
- Directors & Officers liability including coverage for:
- Personal assets of the D&Os.
- Liabilities arising from the roadshow, S-1 and 8-K business combination filings.
- Balance sheet protection for the SPAC.
- Claims advocacy in the event of a loss.
- 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 and bankruptcies.
- Portfolio-Level Risk
- Execution of pre-acquisition proposed savings using Marsh’s unique purchasing platform.
- Applying un-earned D&O premiums against the cost of the post-close insurance program.
- Institute loss reduction strategies to drive down costs for life of investment.
- Customized insurance and risk solutions for the post-close entity.
- Annual metrics based performance review.
- Value-Added Services
- Project finance, structured credit, and political risk.
- Enterprise-level risk optimization assistance (ERM).
- Oliver Wyman actuarial services.
- Employee health and benefits portfolio purchasing (Mercer Portfolio Benefits Alliance© ).
Dedicated Industry Expertise
The core SPAC Services team is supported by Marsh’s dedicated industry specialists around the world. Marsh has more than 25 dedicated industry teams which understand the emerging risks facing individual industries. This allows Marsh to provide proprietary and bespoke risk management and insurance solutions tailored to your industry. This industry focus delivers better underwriting and pricing outcomes.
Contact our specialists to learn more.