Marsh, a subsidiary of Marsh McLennan and the largest insurance broker and risk advisor, introduced a new indemnification coverage for investment banks within its directors and officers liability D&O insurance program.
The product targets companies preparing for initial public offerings (IPOs). The addition responds to rising client demand for expanded D&O protection during IPOs.
Public listings often trigger greater scrutiny from regulators and shareholders, which increases financial exposure for the company, its executives, and external advisors.
Traditional D&O policies cover a company and its leadership against shareholder lawsuit costs but exclude investment banks.
These banks draft prospectuses and manage the issuance and sale of shares. IPO agreements typically require companies to indemnify the banks against certain legal claims after the offering.
Marsh data shows investment banks face litigation in roughly 20% of IPO-related shareholder class actions each year.
They appear in nearly all cases involving alleged misstatements or omissions in prospectuses or registration statements. This pattern leaves IPO companies at risk for large indemnification payouts, often in the millions.
Andy Matthews, Vice President in Marsh’s FINPRO Practice, said IPO transitions bring multiple risks, including indemnification costs to investment banks that can drain millions.
He noted the updated coverage offers IPO clients a stronger D&O structure that shields their balance sheets and reduces operational strain during growth stages.
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
Andy Matthews, a Vice President in Marsh’s FINPRO Practice
“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,” said Andy Matthews.
To close this coverage gap, Marsh worked with D&O insurers to design an enhancement that secures a company’s obligations to its investment banks.
The feature integrates into existing D&O programs, reducing out-of-pocket costs tied to these legal claims.
