Life and General Insurance

Why insure?

 

• The Indian capital markets are witnessing an unparalleled growth as corporate India leverages this prospect to raise funds and accomplish corporate objectives. With the increased market exposure comes increased stakeholder litigation, and with it an increasing awareness of the responsibilities on the directors and officers of companies.

• This gains greater significance when a company makes a public offering of its securities by way of debentures, bonds, etc. Signatories of a public prospectus have personal accountability for its contents and could therefore be found personally liable for the losses of securities arising from misrepresentations within the prospectus.

• Public Offering of Securities Insurance (POSI) indemnifies the insureds against securities claims and provides cover for the wrongful acts of the company and its directors and officers arising from the issue of a prospectus, the underwriter or sponsor of the issue, and third parties associated with the issue.

• Shareholders, investors and analysts have always examined the prospectuses of companies raising capital for stock exchange listings, mergers, expansions, etc. The inspection does not stop once the transaction has been completed; there is then the question of how well has public money been invested, all in an unforgiving environment. 

 

          Offering your company's securities for sale can present many risks, and hidden potential costs, quite apart from the initial costs involved in getting the transaction through. The publication of an offer document, and the marketing presentations during the bookbuilding stage give rise to a number of potential liabilities, and open up the company and its directors up to the risk of litigation if the securities' performance is not in line with expectations of the investors. Legal liability exists for material mis-statements of omissions in the documents related to an offering of securities

 

              A POSI policy could pay for the defence and settlement of such actions, were they to be brought. In a world where uncertainty in investments is endemic, and companies are frequently selling securities in order to achieve as much financial stability as possible, the protection afforded by a POSI policy could mean the difference between carrying on as a going concern if an investor or regulator were to bring an action after the sale of securities, or having serious cashflow and financial provisioning issues.

 

Some features of the policy are:

 

• 7 year policy term

• Premium paid can be written down as a cost of transaction for tax purposes (United Kingdom)

• Cover for investigations costs, as well as defence costs and settlements

• Cover for the company, its directors, selling and/or controlling shareholders, and for the directors' liabilities to underwriters/brokers in the placing agreement

• Broad form, with minimal exclusions