After several years of relative quiet, the initial public offering (IPO) market is showing strong momentum and renewed optimism. Although the total number of companies that actually went public this year remains below early-year expectations, it is significantly higher than levels seen in recent years.

Meanwhile, as of mid-October, the pipeline of companies preparing to go public wasmore than a third larger than it was a year earlier。

In the first three quarters of 2025, more than 160 companies completed IPOs, already surpassing the total of 150 for all of 2024.1

IPO activity climbed steadily throughout the year, peaking in July with 26 IPOs completed that month. The Wall Street Journal referred to this period as"the scorching summer of IPOs", calling it "the best IPO market in years." In the first three quarters of 2025, about 200 companies filed for IPOs, compared with214for all of 2024. As of September 30, the market had raised approximately$31 billion, up from $29.6 billion for all of 2024.

If momentum continues, with tariff-related volatility easing and the start of a rate-cutting cycle, IPO activity from fall 2025 through 2026 could reach its highest level since 2021. However, experience in recent years shows that political and legal environments remain uncertain and could still affect the strength of the IPO pipeline.

Market conditions drive increased underwriting interest

Many factors influence a company's decision to go public, but from an insurance perspective, the current market environment is one of the most favorable in recent years. Key drivers include: a persistently softening directors and officers (D&O) liability insurance market, a scarcity of newly listed companies, and a stock market that continues to rise amid volatility.

Since the passage of the Sarbanes-Oxley Act in 2002 — which aimed to increase corporate transparency and accountability through stricter regulation of public companies — D&O underwriters have sought to expand the number of public companies in their portfolios. However, despite a significant increase in the number of D&O underwriters, the overall size of the public company market has remained persistently low over the past two decades.

This supply-demand imbalance has led more insurers to compete for fewer opportunities and has contributed to an overall soft D&O market. With limited supply relative to demand, underwriters' interest in IPO business is notably higher than in recent years — especially during periods when the legal environment has been less favorable for underwriting public offerings.

Changes in the legal environment

IPOs have historically been viewed as one of the riskiest points in a company's life cycle. The extensive disclosures and risk factors in S-1 filings provide plaintiff attorneys with numerous entry points to identify potential misstatements. Under Section 11 of the Securities Act of 1933, companies face strict liability for any statement deemed false or misleading. This standard of proof is lower than that required for companies under Rule 10(b)(5) of the Securities Exchange Act of 1934, which applies to false or misleading statements in subsequent securities filings, such as quarterly 10-Q earnings reports.

Federal forum provisions reshape the IPO insurance market

Some plaintiff attorneys have chosen to file IPO-related lawsuits in state courts, particularly in plaintiff-friendly jurisdictions such as California. This trend gained momentum after 2010 and was further strengthened after the Supreme Court's 2018 ruling inCyan v. Beaver County, which allowed IPO securities lawsuits to proceed in state courts, significantly increasing litigation risk for companies planning to go public. In response, many insurers raised premiums and reduced capacity.

To mitigate this risk, many companies began including federal forum provisions in their charters, requiring IPO-related lawsuits to be brought only in federal court. Courts upheld these provisions, normalizing the litigation environment. The introduction of federal forum provisions in 2020 restored insurers' confidence that IPO-related securities lawsuits would be heard in federal court, thereby increasing underwriters' interest in IPO business.

SPACs, though fewer in number, continue to shape the IPO market

Although special purpose acquisition companies (SPACs) have existed for some time, a wave of capital raising occurred in 2021, with far more SPACs filing for IPOs that year than in previous years. While SPAC filings have since declined significantly, these vehicles still contribute a considerable share of IPO activity.

Key factors driving the improved IPO insurance environment

Multiple factors have combined in recent years to create a favorable insurance market environment for IPOs, including: a soft D&O market with limited new opportunities, and increased certainty that IPO lawsuits will not be heard in state courts. These factors have resulted in an insurance environment favorable to IPOs, as reflected in:

  • Increased capacity.Previously, insurers typically limited IPO exposure to $5 million; now they commonly offer limits of $10 million.
  • Lower pricing.IPO premiums have fallen significantly. In 2021, average premiums for primary D&O layers exceeded $200,000 per million dollars of limit; by 2025, they had dropped to less than $60,000 per million.
  • Expanded coverage.A major improvement this year is the introduction ofunderwriter coverage, which can be added as a specialized enhancement to traditional D&O policies. This insurance agreement replaces the company's indemnification obligations to underwriters at rates that are typically attractive to insureds.

Addressing the evolving risk landscape with tailored insurance solutions

As the IPO market continues to heat up, private companies should recognize that navigating today's complex and evolving risk landscape requires forward-looking, customized risk management strategies, including building a robust insurance program that adapts to their evolving needs.

Experts in Marsh FINPRO's practice, with deep market knowledge and extensive experience, can help companies optimize their coverage programs to protect their leadership teams and financial bottom lines.

For more information, pleasecontact your Marsh representative。

Sources

1 Renaissance Capital