After years of waiting for favorable IPO (initial public offering) market conditions, the market turmoil of 2025 has left many FinTechs wondering when their opportunity will arrive. As IPO candidates wait for their opportunity, consider using the current lull to your advantage by revisiting your insurance strategy. Especially now, with market conditions generally favorable, most FinTechs will find that a little bit of extra planning now will pay off in the form of better coverage at better prices.
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Insurance underwriters group firms into risk categories like banks, asset managers, and software companies, which works for traditional financial institutions. However, FinTechs, being tech-forward firms in the financial system, defy broad categorization and present unique risks. This can be challenging for brokers unfamiliar with the insurance market but offers opportunities for those who value industry specialization. For IPOs, the lack of a true FinTech risk category allows firms to present themselves advantageously, such as a payments firm or insurtech being viewed as an innovative technology company.
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FinTech IPOs have (and will again) face shareholder litigation and regulatory investigations tied to (and not limited to):
According to Stanford’s Securities Class Action Clearinghouse, roughly 15–20% of companies that went public in the past decade have faced Section 11 litigation tied to their IPO disclosures. Tech companies accounted for about 25% of those lawsuits, financial institutions less than 10%, and the remainder spread across commercial sectors. Importantly, the relative risk varies by industry: tech firms saw lawsuits at a rate of roughly one per three IPOs, while traditional financial institutions were sued less frequently. For FinTechs, this creates strategic flexibility - depending on how they present themselves to underwriters, they can align more closely with tech, finance, or commercial sectors to potentially secure better D&O terms.
D&O insurance serves as important financial protection for the costs arising from these claims and may help firms better capitalize on the financial benefits of an IPO.
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Cyber risk increasingly drives regulatory actions and shareholder suits, especially around IPOs. Investors and regulators closely scrutinize cybersecurity readiness today, and vulnerabilities - whether internal or through third-party vendors - can derail momentum.
Companies going public are attractive cyber targets for many reasons. Ensure your cyber insurance program is robust, alongside a D&O strategy that reflects the realities of the insurance marketplace and FinTech IPO litigation risks.
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FinTechs can improve insurance outcomes by planning ahead before going public. Here are some key steps:
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Going public introduces new exposures and pricing realities for insurance. IPO-stage D&O insurance is typically more expensive, with higher retentions and different limit structures due to the heightened risk environment in the first few years post-IPO. After three years, companies can often renegotiate premiums, retentions, and limits if no major claims or adverse developments occur. A multi-year insurance strategy helps avoid overspending and aligns coverage with changing risk profiles. Traditional benchmarking often falls short for FinTechs, so firms should use analytics-driven approaches to model total cost of risk over time, providing clearer insights into limit structures, pricing projections, and retention strategies.
The slowdown in IPO activity gives FinTech firms something they rarely have much of: time. With insurance market conditions still generally favorable, a little extra planning now will pay for itself many times over in the form of better premiums and coverage when conditions improve. While a delayed IPO is far from ideal, smart firms will see this as an opportunity to refine their insurance strategy and prepare for better times ahead.
WTW hopes you found the general information provided here informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
