New research from Mactavish, the leading expert on commercial insurance placement and disputes, reveals many private equity firms are not placing enough focus on the quality of insurance cover in place at portfolio companies.
Mactavish warns that organisations are generally taking on more risks as their businesses change, but many commercial insurance policies are becoming increasingly generic, which means the chances of them not paying out on claims is rising.
In a survey of senior private equity professionals commissioned by Mactavish, just 20% say they take an active role with the Directors and Officers (D&O) insurance cover of new portfolio companies. A further 40% say they take an active role but leave it to the portfolio companies to decide upon cover specification, but the private equity firm has oversight of this. 17% of respondents say they play no role in helping portfolio companies choose their D&O cover, whilst the balance of 23% said they did not know what role private equity firms play here.
Liam Fitzpatrick, Client Services Director at Mactavish said, “Only too often is an insurance policy, like D&O, dusted off and looked at when it needs to be relied upon. By that stage, it could be too late for the private equity firm to either fill a gap or fix a problem with the existing policy wording for a portfolio company.”