SPAC Risks

Directors and officers of SPACs are exposed to unique risks during the formation of a SPAC, as well as the acquisition of the private target company and the process of taking it public, otherwise known as de-SPAC. D&O insurance thereby becomes essential, as illustrated by increasing demand and cost for this coverage as markets tighten.

Many SPAC-related liability risks present themselves:

  • Inadequate disclosure in original SPAC offering
  • Negotiation breakdown between SPAC and target company
  • Shareholder-led transaction undermining
  • SEC approval de-SPAC disclosure requirement failure

The SEC requires that all conflicts of interest be adequately disclosed to current shareholders and potential investors, but this proves difficult for SPACs oftentimes because there are so many. Add to this potential breach of fiduciary duty claims results from conflicts of interest and judgements during the translation process, and it’s easy to understand why SPACs need to protect themselves with adequate D&O insurance coverage.

In fact, the SEC recently backed up its requirements with enforcement actions that drove home the reality of risk of unwanted litigation and potential liability for SPACs, their target companies, sponsors, officers and directors, throughout the SPAC formation and de-SPAC transaction process. Said unwanted litigation is also wide-ranging, including breach of fiduciary duty, private securities antifraud, and aiding and abetting.

Solution Advise

Directors and Officers (D&O) Insurance

While SPACs are beneficial in many ways, they also expose directors and officers to unique risks not present in traditional companies because SPAC trusts can not be used to indemnify a SPAC leader from a personal lawsuit. These directors and officers must have pockets deep enough to cover settlement costs themselves.

Obviously these individuals would like to purchase a traditional D&O policy to indemnify themselves against these huge personal expenditures, but this is not possible. SPACs operate on an exclusive timetable not covered by the standard 12 month coverage of a typical D&O policy. As a result directors and officers must acquire a custom tailored D&O policy written to cover the projected length of the SPAC and de-SPAC process, including generally a six-year run-off period.

After de-SPACing occurs it’s difficult to get go-forward D&O coverage for SPACs, which usually covers the entire SPAC regardless of duration. That’s why a unique insurance company like First Cover is absolutely essential, one who understands how to think months or years into the future and incorporate all possible scenarios that may require SPAC D&O coverage.

why get it with
first cover?

Customized Solutions

Based on your needs and budget, we can come up with the most feasible solution.

Instant Feedback

Within 24 – 48 hours to receive your preliminary quote, fastest turnaround time in the industry.

Borderless Access

No matter if you are based in Asia, Europe, or U.S., we can provide seamless solutions across all different markets!

End-to-End Services

From initial discussion to assisting you with claims, we will be with you on each step of the way!

Still in doubt?

Ask an Expert

D&O Liability Insurance

Public D&O
Private D&O
Foreign company D&O

Other Coverage

Errors & Omissions (E&O)
Employment Practices Liability

SEC Fillings

EDGAR Filings
iXBRL Service
Printing Service


Education Technology


Financial Services
Professional Service
Consumer Product


On-Demand & Shared Economy
On-Demand Delivery

Life Science

Virtual Care, TeleHealth & Telemedicine
Dietary Supplement & Nutraceutical
FamTech & BabyTech