By raising capital from the public, a company is opening up potential liabilities which are closely scrutinised by regulators. Investors who base their investment decisions on a prospectus or a roadshow may claim the full value of their loss if the information supplied is proven wrong.

1. Individuals responsible for the
prospectus may face civil and
criminal liabilities if the prospectus
or roadshow is inaccurate,
incomplete or misleading,
particularly if they cannot prove that
proper care was taken preparing it.
While some companies or directors
may choose to retain the risk or
cover it by means of extension in
their D&O policies, many look to
buy specialist stand-alone POSI
coverage to better protect the
individuals involved in the offering
as well as the company against
liabilities associated with a public
offering and with a dedicated
insurance limit.
Public Offering of Securities
Insurance (POSI)
By raising capital from the public, a company is opening up potential
liabilities which are closely scrutinised by regulators. Investors who base
their investment decisions on a prospectus or a roadshow may claim the
full value of their loss if the information supplied is proven wrong.
A prospectus must explicitly confirm that the individuals responsible
for it have taken reasonable care to make sure the information is true.
The following have been held liable for its content:
• The company issuing the securities
• The company directors at the time the prospectus is published
• Any future directors named in the prospectus
• Anyone who is stated as accepting responsibility in the prospectus
• Anyone who authorised the contents of the prospectus
• Individuals making statements at roadshows
Advantages of a standalone POSI policy:
• Multi-year policy period, unlike an annually renewable DO policy.
Prospectus claims can be brought years after the offering, up to the
statute of limitations in the applicable jurisdiction. A POSI policy
provides cover for the duration of the transaction’s exposures in the
relevant jurisdiction. A multi-year policy period also means there is no
’renewal’ risk of increased premiums or changed terms and conditions
in future years.
• ’One off’ premium which can be allocated as a transaction / offering
cost (deducted from proceeds of prospectus and written down for
tax purposes).
• The annual DO policy limit will be preserved from POSI claims, which
can be severe and catastrophic, leaving DOs exposed in the event of
company liquidation.
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• Claims arising out of the offering are ’ring-fenced’ within the POSI
policy: limits tailored to the specific transaction, rather than leaving
directors to rely on the DO policy.
• A POSI policy can be customised and could, for example, cover
additional insureds than a traditional DO policy or add in cover
for a subsequent offering.
Key coverage
A POSI policy provides cover for financial loss and legal expenses
as a result of a prospectus claim made against an insured.
The policy is written on a claims made and notified basis: it applies only
to a claim first made and properly notified within the policy terms.
How does a POSI policy work? A POSI policy will protect insureds
against claims arising from an offering and covers liabilities arising
from negotiations, discussions and decisions in connection with
the offering for:
• Individual directors and officers that may be held personally liable
• The company, in the event that:
– it has indemnified directors and/or officers for their personal liability
– a securities claim has been brought against the company itself
– it has indemnified the IPO Underwriters or Sponsors (optional)
• IPO Underwriters or Sponsors for a securities claim (optional)
Key features:
• Broad definition of claim
• Broad definition of insured
• Worldwide coverage
• Coverage available for punitive and exemplary damages
• Advancement of defence costs
• Entity cover for securities offerings
• Costs and expenses including: public relations expenses, crisis management
costs, investigation and enquiry costs, regulatory costs
• Statements including statements made by an insured in any ’road shows’
prior to the offering and documents comprising a preliminary prospectus
Limit, excess and cost
The limit will depend on the size
of the offering, but reasonable
limits of indemnity are available.
No excess will apply to the indi-
vidual DOs for their personal
liability. The premium will be de-
pendent on limits and profile and
will be payable in the first year of
the multi-year policy period.
Key underwriting
information
• Analysis of the financial
statements
• Analysis of the offering
documents
• Reviews of corporate
governance procedures /
risk management
• Completed proposal form
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For more information
please contact:
Tracy-Lee Kus
Managing Director
+44 (0)20 7086 3963
tracy-lee.kus@aon.co.uk
Enrico Nanni
Chief Commercial Officer
+44(0)20 7086 4828
enrico.nanni@aon.co.uk
About Aon
Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and reinsurance brokerage, and human resources solutions and outsourcing
services. Through its more than 69,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative risk and people solutions.
For further information on our capabilities and to learn how we empower results for clients, please visit: http://aon.mediaroom.com.
© Aon plc 2015. All rights reserved.
The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity.
Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the
date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination
of the particular situation.
Aon UK Limited is authorised and regulated by the Financial Conduct Authority.
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