Total, H1 class actions lower, SPACs enhance – Enterprise Insurance

The number of securities class action lawsuits filed in the first half of the year has declined, but special purpose vehicle-related lawsuits have increased, according to a report released Tuesday.

The report, issued by Woodruff Sawyer & Co., based in San Francisco, also says that increased capacity in the director and executive liability market could result in flat extensions by mid-2022, although that is unlikely to benefit SPACs.

The 91 securities class actions filed in the first half of 2021 were, according to the report by San Francisco-based Woodruff Sawyer & Co.

"If that average rate of 15.2 cases filed per month continues, we could finally see a drop below the 10-year average of 186 cases this year, about 182 total, the report said, adding that it is no fewer than 200 cases are these cases are filed each year since 2016.

The report also says the 91 cases reflect a steady stream of COVID-related cases. These accounted for 12% of the 91 cases submitted, bringing the total number of COVID-19-related cases since the pandemic first emerged to 31, the report said.

Among other things, the number of SPAC-related securities disputes rose to 15 in the first half of this year, compared to five in 2020 and two in 2019.

The report warns, “The explosion in SPAC IPOs over the past year and a half is a concern for insurance companies as they seek to identify the D&O-related risks for companies going public through a deSPAC deal.

"With current filing activity, de-SPAC-related litigation could account for up to 17% of total filings in 2021."

The report says that with about a dozen new additions to the business liability insurance market and more expected next year, "there is a new hope" that the new capacity will increase competition, easing upward pressure on excess tariffs in 2020 somewhat could.

However, this is not expected to benefit SPACS as "insurers are cautious about litigation related to the de-SPAC process," the report said.

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