The modern special purpose acquisition company, or SPAC, encounters several challenges with regard to risk management and insurance which are uncovered and discussed in this paper. As the structural features and strategies of the vehicle have continued to evolve, so too has the threat landscape which SPAC operators must be prepared to face. In contrast with a traditional public operating company or IPO candidate, a SPAC does not possess a mature risk management program or hardened information security posture. As a result, it is paramount for SPAC operators and stakeholders to begin to recognize and appreciate the breadth of the current cyber risk landscape, potential liabilities and cyber-related threats. Additionally, as the insurance marketplace has been slow to recognize new structural features, SPAC operators and sponsors are faced with having to absorb very high and unfavorable total costs of risk. This paper sheds light upon some of the nuanced features which need to be represented during negotiations with underwriters, speak to the various ways in which cyber-related issues threaten and influence the process, and outline strategies which can be employed to mitigate these risks while bolstering the chances of achieving a favorable outcome. The full white paper is available here.
John C. Marchisi, MLIS, GRCP, is an Area Vice President with the Management Liability and Equity/M&A practices of Arthur J. Gallagher & Co., focusing on insurance and risk management for Directors & Officers Liability, Cyber Liability, and Transactional risk. His particular focus is in SPAC IPO, public offering, and portfolio fund structures, with a niche specialties in Financial Institutions and the Maritime industry. John has over 15 years of experience with SPAC transactions, which began on the American Stock Exchange and New York Stock Exchange, where he led businesses and SPAC IPO listings as a Managing Director and Exchange Official. John has developed proprietary analytics and resources to assist insurance carrier partners with the underwriting of SPAC programs, and is responsible for numerous national publications on the subjects of risk management, management liability, and capital market structure.