Special Purpose Acquisition Companies (SPACs) have hit the market at breakneck speed, transforming the process of going public. Although that very speed that has made many insurers wary, HUB’s SPAC insurance experts can help.
What is a SPAC?
A SPAC is a shell company looking to purchase a private company and take it public. An alternative to traditional initial public offerings (IPOs), SPACs raise funds through a sponsor prior to formation, so they don’t need to undergo the same scrutiny as an IPO, such as an audit. SPACs are often called “blank check” companies.
SPACs’ popularity has meant larger deals and a closing rate of more than 90%. The vehicle has become so popular that sponsors include former star athletes and celebrities.
Directors and Officers Coverage is Essential – But Insurers are Wary
Directors and Officers Insurance (D&O) is the key SPAC insurance coverage– as sponsors of a deal involving SPACs, you and your executives could face lawsuits alleging misrepresentation and conflicts of interest with respect to the formation of the SPAC and the process of securing an acquisition target. However, procuring D&O coverage may be a challenge. SPACs have proven to be so popular that many insurers fear SPAC structures are badly constructed and the deals will be poorly executed. That’s resulted in a hard market with rising premiums and declining limits, making it difficult for SPACs to obtain necessary D&O coverage.
HUB’s SPAC Insurance Expertise
Despite these challenges, HUB can help. Here’s how our SPAC insurance experts are helping SPAC sponsors secure best-in-class coverage:
- We work closely with underwriters. Even as most D&O insurers won’t insure SPACs, HUB’s D&O SPAC experts are placing insurance programs for our clients every day. HUB knows each individual underwriter’s risk appetite and can frame client SPACs in the best possible light to receive optimal coverage and pricing.
- HUB can identify and navigate new coverage landmines. Insurance underwriters change policy exclusions, as well as terms and conditions, almost on a weekly basis. HUB’s SPAC insurance experts know how to identify and negotiate coverage to avoid those landmines whenever possible.
- We can craft alternative D&O structures and manage costs. HUB’s SPAC insurance experts have developed new and innovative ways to construct programs, optimizing coverage and managing costs. Given the different stages of a SPAC — and the different component parts of a D&O insurance program — our innovative approaches can help clients get the optimal coverage at the optimal cost.
Contact a HUB SPAC insurance broker to get started.