IPO uptick presents public D&O opportunities as carrier interest in private market mounts

By Isha Marathe

Aug 14 - (The Insurer) - A recent uptick in IPO activity may present opportunities for public D&O insurers against a backdrop of flattening rate reductions in the strained market, as many carriers continue to grow their private D&O books, brokers told The Insurer.

Despite the struggles of a soft public D&O market, underwriters' efforts at being more discerning in capital allocation and deployment have shown promise, with falling rates potentially having reached the bottom.

For example, Marsh's public D&O book showed a rate drop of less than 1% in Q2 of 2025, said managing director for the broker's private equity clients in financial lines, Will Fahey.

"So still negative, but you're now seeing traditional public D&O pricing kind of hitting its floor," he said.

Aon's U.S. financial services group CEO, Tim Fletcher, said Aon's public D&O book saw a 2.2% rate decrease in Q2, which he described as "much more muted" than in previous quarters.

There may even be an emerging glimmer of untapped opportunity in the public D&O market as IPOs see an upcurve after a decade-long rollercoaster, said Marsh's Fahey.

Earlier in August, Marsh launched a new investment bank indemnification coverage to its D&O liability insurance offering, specifically for clients pursuing initial public offerings.

The product is essentially a balance sheet protection for the IPO-ing company, should the investment bank underwriters be named as defendants in securities class actions alongside the company, Fahey said.

He said that regulatory reforms like federal forum selection clauses limiting certain IPO litigation in Delaware have eased the burden of losses on insurers, increasing the appetite to write more D&O coverage in the sector.

"As a result, the willingness of carriers to write IPOs is probably better now than at any time in the last 10 years," Fahey said. "So within the public company space, IPOs are probably an area where underwriter appetite right now is maybe greatest."

The number of U.S. IPOs in Q2 2025 increased by 16% year on year, with June alone accounting for nine of the 16 IPOs that raised over $50 million, according to EY's U.S. IPO market trends Q2 2025 report. Despite the uptick, gross proceeds declined by 20%, the report found.

While the strong finish to the quarter renewed optimism in the IPO market, trade uncertainty borne of U.S. tariffs and geopolitical unrest could impact the growth trajectory.

Should IPOs continue to trend positively, Fahey believes it could be an opportunity for carriers.

"There's over $3 trillion worth of private companies that private equity firms are sitting on that they would love to have an exit on if they felt the timing was right and they could do so profitably ... if we actually saw that activity happen, I think you would see a very dynamic D&O marketplace to respond to that," he said.

"It's something to watch in the second half of this year."

EXITS AND PRIVATE D&O APPETITE

Amid the challenges in the public D&O market, there have been notable exits including Argo and Markel.

Arthur J. Gallagher's financial risk practices executive leader Jennifer Sharkey told The Insurer that the broker has heard "rumblings" of some other legacy insurers looking to exit the public D&O market, but any definitive departures are uncertain at this time.

For others, like Aon's Fletcher, "the jury is out" on future exits.

"We knew (Markel) had some struggles, maybe they were behaving a little differently, but by no means did we think their public D&O book of business was on fire," Fletcher said. "Whereas Argo, I think, was not a surprise (for anyone)."

Ultimately, the two major exits from the U.S. market have not shaken up the field or reduced capacity in any meaningful way.

Kelly Theorig, who joined Lockton in July from Marsh as D&O and EPL leader, said the exits from public D&O have not affected the broker's clients but that she has seen a change in carrier behavior.

"We are seeing a shift in where carriers would like to attach on a (public D&O) program, most are interested in writing either the primary or the lead side A and less so interested in middle and high excess positions on larger towers," Thoerig said.

"That's primarily a function of the profitability of those books ... There has certainly been a lot of claims activity that has impacted public company markets and crept further up the tower into those more leanly priced middle (and) excess layers."

Despite slowing rate reductions and potential opportunities in the public D&O market, the sector remains challenged by the expected rise in securities class actions amid speculation of further carrier exits.

As such, "almost every (D&O) insurer I talked to wants to grow their private book of business", Fletcher said.

"The appetite for private is strong."

The private D&O market is seeing some rate reductions, and has grown highly competitive with "an awful lot of capacity", Gallagher's Sharkey said.