As SPACs Advance, So Does the D&O Underwriting Market
White Paper Summary
An investment trend that is gaining in popularity presents a substantial business opportunity for commercial insurers, specifically D&O underwriters, provided they can navigate a somewhat complex underwriting and claims process; that is, should significant claims develop.
What are known as special purpose acquisition companies, or SPACs, have existed for decades but became an increasing focus for investors in the latter half of 2020. Simply stated, the investment opportunity allows a management team, backed by investors, to form a vehicle, the SPAC, that acquires a private company, merges with it, and creates a new public entity.
Some consider this a more controlled and potentially profitable way to bring a private company public, as opposed to a standard IPO, provided the SPAC’s management team is talented enough to correctly gauge a market opportunity and execute on it. According to guidance from the Securities and Exchange Commission issued on May 25, 2021, the vehicle also can give investors more control over deal terms.
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