IPO insurance: Protection for companies going public

A private equity and fund liability insurance policy serves as a safeguard for firms and managers, protecting them from indemnity-related risks and acting as a backstop for non-indemnifiable claims during insolvency. It combines various coverages to provide a comprehensive solution. Although the insurance policy issued will define the actual scope of coverage, here is a general overview of the coverages:

1. General partners’ liability: This coverage is designed to protect private equity and venture capital firms and funds from suits alleging wrongful acts committed by directors, officers, managing members, or general partners of private equity and venture capital firms.
2. Professional liability: This coverage is designed to address claims related to errors or omissions in the performance of professional services by private equity and venture capital firms.
3. Outside directorship liability: This coverage provides protection for directors serving on boards outside the insured firm. It is typically written as excess coverage over any insurance available at the portfolio company.
4. Employment practices liability: Employment practices liability insurance covers claims made against the insured organization and insured individuals for employment-related issues such as discrimination, sexual harassment, wrongful termination, and other allegations.
5. Fiduciary liability: Fiduciary liability coverage protects trustees, employers, fiduciaries, professional administrators, and the plan itself from errors and omissions in the administration of employee benefit programs, as mandated by the Employee Retirement Income Security Act (ERISA).
6. Cyber liability: Cyber liability coverage addresses first- and third-party risks associated with e-business, the Internet, networks, and informational assets. It can include privacy issues, intellectual property infringement, cyber ransom, business interruption, virus transmission, and breach response.
7. Crime coverage: Also known as Financial Institution Bond, this coverage protects firms and funds against losses resulting from dishonest acts of employees, burglary, robbery or theft (both on the premises and in transit), forgery, counterfeiting, electronic funds transfer, and other perils in the financial sector.

Marsh PEMA advisors work closely with clients to craft tailored policies that meet their specific needs. The target markets for this insurance include various investment strategies, such as fund of funds, mezzanine debt funds, real estate funds, venture capital funds, private equity funds, leveraged buyout funds, and hedge funds.