I recently blogged about how, during what is a challenging D&O pricing environment, some insurers are starting to look at company diversity practices. As the SPAC craze continues, SPACs are running into more issues with D&O insurance pricing. A recent Mayer Brown Free Writing & Perspectives blog says D&O pricing for SPAC sponsors has increased dramatically in just a few weeks:
The contributing factors to the difficult D&O pricing environment include the fact that there are only a handful of insurers who are willing to write D&O coverage for SPACs and these same insurers have been inundated with requests for such coverage over the last few weeks and are running out of annual capacity.
These factors and others have driven SPAC D&O pricing to levels that are 100% to 200% higher than they were just a few weeks ago. As a result, the cost of a $20 million D&O policy has jumped from mid-$400,000s to between $900,000 and $1,100,000 just in the last month and in turn has led to hundreds of thousands of dollars in unplanned expenditures. SPACs looking at previous SPAC S-1 registration statements should be mindful that D&O insurance cost estimates in typical S-1s may have been actionable several years ago but are wishful thinking in today’s D&O market.
A recent Business Insurance article says D&O liability pricing isn’t getting any better. The article says pricing is going up and underwriters are raising retentions. As to when we’ll start seeing pricing improvements, the article says some believe there won’t be a letup until sometime in the third quarter of this year.
-Lynn Jokela, TheCorporateCounse.net January 22, 2021
