SPAC, also known as special purpose acquisition company, is an alternative to traditional IPOs. These “blank check” companies allow private firms to raise capital through an IPO, with the intention of using that capital to acquire an existing, privately held business later. This approach has been seen as a way to reduce some of the costs of going public, while also enabling private companies quicker access to public markets.
However, with the growth of SPACs, comes the need for specialized insurance coverage to protect the participants in the SPAC process. SPAC directors and officers liability insurance, or SPAC D&O insurance, is designed to provide financial protection in the event of securities lawsuits brought against SPAC participants. With the rise in SPAC IPOs and de-SPAC transactions, demand for D&O insurance in this market has increased.