The Essential Guide to D&O Insurance Placement for Foreign Filers Going Public on a US Exchange

Guide to D&O Insurance for Foreign IPOs and Direct Listings 2024

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Foreign private issuers (FPI) are companies organized outside of the United States who decide to list shares on a US exchange such as the NYSE or the Nasdaq. FPIs do this for a variety of reasons, including the access to capital, liquidity, and credibility that comes with being listed on a major US exchange.

But there is a cost—and that cost includes the risk of a US-style securities class action lawsuit. Indeed, in 2023, 20% of the total class action filings were against foreign-domiciled companies compared to 21% in 2022. 

This amounted to 38 class action suits against foreign filers listed on the US exchange across 14 countries.  

Foreign Filings by Market Cap

Data from Woodruff Sawyer’s proprietary DataboxTM

Litigation coverage is a big reason foreign filers invest in directors and officers (D&O) liability insurance, especially since most IPO companies are sued within the first few years of going public. 

When considering when to start building a D&O insurance program, timing is key. Companies benefit from a head start on this complex process to ensure a smooth ride leading to day one on the stock exchange. 

Woodruff Sawyer’s 2024 Guide to D&O Insurance for Foreign IPOs and Direct Listings offers an insightful look at the five key stages in placing D&O insurance ahead of an IPO.

5 Steps to Align Your D&O Insurance Placement with IPO Milestones for Foreign Filers

As soon as you know you’re going public, you should start vetting specialized brokers. Ideally, you’ll want to start the D&O insurance placement process well before the planned IPO. 

We recommend a five-stage insurance placement process that aligns with key milestones on the road to going public, as illustrated below.

Private to Public Timeline 2024

1. The Preparation Phase

In the preparation phase, we set the foundation for the program. Strategy meetings will gather more information about the company and its risks.

This includes exploring any global subsidiaries that may need coverage, learning about other key insurances, implementing corporate governance programs to further reduce risk, and much more. 

From an IPO standpoint, this will also be when you have your IPO organizational meeting and are writing your F-1 (or S-1) and filing your first registration statement with the US Securities and Exchange Commission. 

2. The Launch Phase 

The next phase gets the program off the ground by refining the limits of the program based on your unique risks, looking closer at self-insured retentions, and other key items. 

This is also a good time to brief your board of directors on the current litigation environment for IPOs as well as D&O insurance carrier market dynamics.

This phase coincides with IPO milestones such as presenting to bankers and receiving the Securities and Exchange Commission's comments on your registration statement.

3. The Broker Phase

In the broker phase, we will negotiate higher limits warranties, present the program to the board of directors, and provide executive and employee compliance training.

Training is helpful as companies go from private to public and face new liabilities, such as insider trading.

The brokering phase aligns with IPO milestones such as the public flip of your registration statement. 

4. The Implementation Phase

This is where we’ll finalize the program, including a full sign-off from the board. 

This is also where you’ll solidify executive warranties (that directors and officers know of nothing that is likely to give rise to a claim), address housekeeping items like insurer conditions and coordinate the transition of coverage from private company to public.

Ideally, all of this happens before the roadshow. We then bind the public company's D&O insurance program after pricing, ensuring that the program is ready to respond on day one of the IPO.

5. The Support Phase

A good brokerage will provide robust ongoing support after the program is in place, including counseling, director and officer training and education to stay ahead of emerging risks, and claims advocacy. 

For more details on this five-stage process, access your copy of Woodruff Sawyer’s Guide to D&O Insurance for Foreign IPOs and Direct Listings, 2024 Edition



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