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H1 class-action securities suits fall overall, SPACs increase

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D&O

The number of securities class-action lawsuits filed in this year’s first half is down, but lawsuits related to special purpose acquisition companies is up, says a report issued Tuesday.

The report issued by San Francisco-based Woodruff Sawyer & Co. says also that increased capacity in the directors and officers liability market could lead to flat renewals by mid-2022, although this is unlikely to benefit SPACs.

The 91 securities class actions filed in 2021’s first half was a 13% drop from the 105 issued for the comparable period a year ago, according to the report issued by San Francisco-based Woodruff Sawyer & Co.

“If this average rate of 15.2 cases filed per month persists, we could finally see a drop below the 10-year average” of 186 cases for a total of about 182 this year, the report states, adding there have no fewer than 200 of these cases filed per year since 2016.

The report says also the 91 cases reflects a steady stream of COVID-related cases. These accounted for 12% of the 91 cases filed, bringing the total number of COVID-19 related cases filed since the pandemic’s advent to 31, according to the report.

Among other findings, the number of SPAC-related securities litigation filings increased to 15 in the first half of this year, compared with five in 2020 and two in 2019.

The report warns, “The explosion of SPAC IPOs in the last year and a half is a concern for insurance underwriters as the attempt to discern the D&O-related risks for companies that go public through a deSPAC transaction.

“At the current rate of filing activity, de-SPAC-related litigation could comprise up to 17% of total filings in 2021.”

The report says with about dozen new entrants into the management liability insurance market and more expected over the next year, “there is some new hope” the new capacity will increase competition, which could relieve some of the upward pressure on excess layer rates in 2020.

This is not expected, however, to benefit SPACS because “underwriters are cautious about litigation related to the de-SPAC process,” the report says.

 

 

 

 

 

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