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Management Liability InsuranceDirectors and Officers InsurancePOSI Insurance: De-Risking IPOs and Public Capital Raises
The moment your admission document or prospectus is published, your directors, founders, and selling shareholders become personally liable for the accuracy of the information, forward-looking statements, and financial information disclosed.
Public Offering of Securities Insurance
Public Offering of Securities Insurance, commonly known as POSI Insurance, protects companies, directors, officers, selling shareholders, and transaction participants against securities claims arising from an IPO, listing, placing, rights issue, secondary offering, or other public capital raise.
A public securities transaction creates a concentrated liability event. The company is asking investors to rely on formal disclosure documents, financial projections, risk factors, trading statements, investor presentations, analyst briefings, and management representations. If the share price later falls or the business underperforms, investors may allege that material information was misstated, omitted, or presented in a misleading way.
At Indemnity, we help companies and transaction teams structure POSI around the listing venue, offering size, investor base, disclosure documents, underwriting arrangements, indemnities, overseas exposure, and governance risk.
Structuring POSI with D&O
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POSI Insurance is designed to sit alongside Directors and Officers Insurance, not simply replace it. While D&O protects management liability across the ongoing life of the company, POSI is transaction specific. It is built around the public offering, the disclosure process, and the investor claims that may follow.
For boards, CFOs, general counsel, sponsors, brokers, and private equity sellers, POSI can help ring-fence securities liability from the wider D&O programme, preserve management protection, and satisfy the risk allocation demands of a public capital markets transaction.
The Mechanics of Public Securities Liability
A public capital raise places pressure on disclosure accuracy. Every statement in the prospectus, admission document, investor presentation, financial model, risk factor, and roadshow deck can become evidence in a later securities claim.
Investors may argue that they bought securities based on information that was incomplete, inaccurate, overly optimistic, or misleading. POSI Insurance is designed to fund legal defence costs, covered settlements, and compensatory awards arising from insured securities claims, subject to the policy wording.
Prospectus Misrepresentation & Omission Defence
Prospectus misrepresentation and omission claims are the central exposure in a POSI placement. Institutional investors, retail investors, shareholder groups, or litigation funders may allege that the admission document, prospectus, registration statement, circular, or public offering materials contained misleading information or omitted material facts.
A claim does not need to be valid to become expensive. Securities claims can involve extensive document review, expert evidence, forensic accounting, regulatory scrutiny, director interviews, disclosure analysis, and multi-party defence coordination.
POSI Insurance can help fund legal defence costs and covered compensation exposure where investors allege they suffered loss because the offering materials misrepresented the company’s position or failed to disclose material operational risks.
Roadshow and Pre-Listing Representation Cover
IPO and capital raise liability does not arise only from the final prospectus. Senior executives, founders, CFOs, sponsors, brokers, bookrunners, and advisers may make statements during the pre-listing process that investors later rely upon. These statements may appear in roadshows, analyst briefings, management presentations, investor meetings, Q&A sessions, press statements, research interactions, and marketing materials.
Roadshow and pre-listing representation cover is designed to address this exposure. The risk is particularly acute during high-pressure bookbuilding, institutional investor meetings, and analyst education processes.
Management teams may be challenged to explain complex growth narratives in compressed timeframes. A verbal assurance, slide deck statement, or answer to an investor question may later be scrutinised against post-listing performance.
A POSI programme should therefore cover the pre-listing process.
Non-Rescindable Side A Protection
POSI Insurance should protect the individual directors and officers whose personal assets may be exposed if the company cannot or will not indemnify them. This is particularly important where the company faces insolvency, bankruptcy, administration, restructuring, regulatory pressure, or severe post-listing financial deterioration.
Side A cover protects individual insured persons where indemnification from the company is unavailable. In a public offering context, this can be critical because securities litigation may arise at precisely the moment the company is financially stressed.
Non-rescindable Side A protection means the insurer cannot rescind or unwind that protection against innocent directors, even if there are issues elsewhere in the placement or disclosure process, subject to the precise policy wording.
A strong POSI structure should therefore preserve dedicated protection for innocent individual directors and officers.
Strategic Transaction Integrations
POSI Insurance should be integrated into the wider transaction risk strategy. It interacts with D&O Insurance, underwriting agreements, adviser indemnities, disclosure controls, listing rules, investor relations, and post-IPO governance. The policy should be structured early in the transaction process, not treated as a late-stage closing document.
Underwriter and Advisor Indemnities
Public capital raises often require the issuer to provide indemnities to sponsoring investment banks, brokers, nominated advisers, underwriters, bookrunners, legal advisers, reporting accountants, and other transaction participants.
The indemnities may require the company to protect advisers against liabilities arising from the offering, including claims linked to disclosure documents, investor communications, regulatory issues, or transaction execution.
For the issuer, these contractual indemnities can create significant financial exposure. POSI Insurance can be structured to address, where covered, claims involving insured transaction participants and liabilities arising out of the public offering process. However, not every contractual indemnity is automatically insured.
Dual-Listings & Overseas Compliance
Overseas offerings create heightened securities liability exposure. A UK placement may be materially different from a dual listing involving US investors, NASDAQ, NYSE, Rule 144A activity, Canadian purchasers, European institutions, or other international capital markets.
US securities exposure is particularly significant because claims may involve class actions, higher defence costs, broader discovery obligations, plaintiff law firm activity, statutory liability regimes, and increased settlement pressure.
The insurance wording must reflect where claims may be brought, not only where the issuer is incorporated. A company may be headquartered in the UK but still face North American securities litigation if it markets to US investors, lists on a US exchange, or makes statements relied upon by US purchasers.
The policy should therefore be reviewed for territorial limits, jurisdiction, choice of law, class action treatment, defence costs, local counsel costs, and whether US securities claims are fully covered, sub-limited, or excluded.
POSI Insurance vs. Directors and Officers Insurance
Directors and Officers Insurance protects directors and officers against management liability claims arising during the general operation of the company. POSI Insurance is designed around a specific securities offering.
A D&O policy may include some securities cover, particularly for public companies, but relying solely on the annual D&O tower can create problems. A securities claim arising from an IPO or capital raise may erode the D&O limit needed for other management liability claims. It may also create disputes over prior acts, transaction exclusions, prospectus liability, or whether the claim is sufficiently connected to the offering.
A dedicated POSI policy can help:
- ring-fence offering-related liability;
- preserve the annual D&O tower;
- protect directors involved in the transaction;
- include selling shareholders where required;
- cover defined offering documents;
- address investor claim severity;
- support adviser indemnity negotiations;
- provide longer discovery or run-off protection for transaction claims.
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