After several years of relative quiet, the initial public offering (IPO) market is showing strong momentum and optimism. Although the total number of companies that actually went public this year is lower than initially expected at the start of the year, it is still significantly higher than in previous years.

Meanwhile, as of mid-October, the pipeline of companies preparing to go public was compared to the same period last yearup more than one-third。

In the first nine months of 2025, more than 160 companies went public, surpassing the 150 companies 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 called this period"a scorching summer for IPOs", and said "this is the best IPO market in years." In the first three quarters of 2025, about 200 companies filed for listing, compared to214 companiesfor all of 2024. As of September 30, total funds raised were close to$31 billion, higher than the $29.6 billion for all of 2024.

If momentum continues, IPO activity from fall 2025 through 2026 could reach its highest level since 2021, provided that tariff-related volatility subsides and interest rate cuts materialize. However, experience in recent years shows that the political and legal environment is unpredictable and could 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, current market conditions are the most favorable in recent years. Key drivers include: the continued soft market for directors and officers (D&O) liability insurance, the scarcity of opportunities for newly public companies, and the stock market's continued upward trend 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 pool of public companies has remained at low levels over the past two decades.

This 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 has increased markedly compared to recent years, especially following a period when the legal environment was unfavorable for underwriting public company risk.

Changes in the legal environment

IPOs have historically been considered one of the riskiest moments in a company's history. The extensive disclosures and risk factors required in the pre-IPO S-1 filing provide numerous opportunities for plaintiff attorneys to identify potential misstatements. Under Section 11 of the Securities Act of 1933, companies face strict liability for any statement found to be false or misleading. This standard of proof is lower than the standard applied under Section 10(b)(5) of the Securities Exchange Act of 1934 for 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 filed IPO-related lawsuits in state courts, particularly in plaintiff-friendly jurisdictions like California. This trend intensified after 2010 and was reinforced by 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 public companies. 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 filed only in federal court. Courts upheld these provisions, normalizing the litigation environment. The introduction of federal forum provisions in 2020 gave insurers renewed confidence that IPO-related securities lawsuits would be heard in federal court, thereby increasing underwriters' interest in IPO business.

SPAC numbers decline but still impact the IPO market

Although special purpose acquisition companies (SPACs) have existed for a long time, 2021 saw a capital-raising boom, with far more SPACs filing for listing that year than in previous years. Although SPAC filings have since fallen sharply, these companies still contribute a significant portion of IPO activity.

Key factors driving improved IPO insurance conditions

In recent years, several factors have combined 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 led to the following favorable conditions:

  • Increased capacity.Previously, insurers typically limited IPO exposure to $5 million; they now commonly offer limits of $10 million.
  • Decreased pricing.IPO premiums have fallen significantly. In 2021, the average premium for primary D&O layers exceeded $200,000 per million dollars of limit, while in 2025 it has dropped to less than $60,000 per million dollars.
  • 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 obligation 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 ever-changing risk environment requires proactive and tailored risk management strategies, including robust insurance programs that adapt to their evolving needs.

Experts in Marsh's FINPRO practice have deep market knowledge and experience to help organizations of all types optimize coverage to protect their leadership teams and financial bottom lines.

For more information, pleasecontact your Marsh representative。

Sources

1 Renaissance Capital