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Welcome to the Pride,

Every week, we review 200+ insurance articles to bring you what matters most.

This week, we're looking at three new emerging developments that could impact D&O insurance in 2025…

1. The DEI legal landscape just underwent its biggest change in decades - and could expose board members to claims from all sides
2. A massive IPO wave is coming (370+ companies in the pipeline) - with new risks your D&O coverage may not consider
3. NIL collectives represent a $2.8B risk that didn't exist two years ago
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Let’s dive in…

The DEI Legal Landscape Just Shifted (Again)

Remember when DEI was a compliance issue?

Those days are over.

The ground is shifting under corporate DEI programs, and it's creating new exposures that could test the boundaries of traditional D&O coverage.

Why This Matters Now

We're watching a remarkable legal pivot:

• California's board diversity requirements overturned
• Supreme Court restricting affirmative action
• 34 state AGs split on enforcement
• Private sector DEI initiatives facing new scrutiny

The result? Companies now face potential litigation from every direction.

What's Different This Time

This isn't just another regulatory change.

Companies face a uniquely complex challenge:

• Follow federal guidance? Risk state AG prosecution
• Scale back DEI? Risk shareholder litigation
• Maintain status quo? Risk regulatory investigation

And your current D&O policy might not cover all these scenarios.

Let's break down what this means for your coverage…

The $100M Question: Are Your Directors Protected in DEI's New Era?

The legal landscape around Diversity, Equity, and Inclusion (DEI) is shifting like sand beneath our feet. Recent court decisions and regulatory changes are creating new questions about D&O exposure - questions that could affect your coverage (source).

Here's your 3-bullet summary:

1. Legal Framework Changing:
   Courts are actively reviewing what constitutes permissible DEI practices, with implications for directors and officers.
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2. Regulatory Split:
   34 state Attorneys General are divided on DEI enforcement, with 13 states actively prosecuting certain DEI practices as discriminatory.
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3. Coverage Questions:
   Standard D&O policies may not fully address these emerging exposures, particularly around regulatory investigations and shareholder actions.

The Sink Hole Waiting to Happen: DEI Programs

DEI on the whole started to change significantly when California's board diversity requirements were overturned in May 2023. One month later, the Supreme Court restricted affirmative action considerations. Now, the Trump administration's executive orders are expanding enforcement against private-sector DEI initiatives. (source)​

Complexity exists now with companies facing potential litigation from multiple directions.

• Shareholders challenging DEI program changes
• Regulatory investigations from state AGs
• Federal contractor exposure under False Claims Act
• Employment-related claims that overlap with D&O coverage

So what?

These developments could create exposure in three key areas:

1. Shareholder Actions:
   Companies might face derivative suits over their DEI approach - whether they maintain programs or scale them back
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2. Regulatory Risk:
   Operating across state lines? You might need to navigate conflicting enforcement priorities
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3. Coverage Coordination:
   The intersection of employment practices and corporate governance could raise questions about which policies respond

What We're Seeing in the Market:

Insurance carriers are paying attention:

• More questions about DEI during renewal meetings
• Growing underwriter scrutiny on regulatory exposures
• Increased interest in how D&O and EPLI policies work together

Three actions to take now:

1. Review Your D&O Policy:
   • Examine conduct exclusions and how they might apply to DEI decisions
   • Evaluate pre-claim investigation coverage limits
   • Consider regulatory investigation coverage needs
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2. Document Your Approach:
   • Maintain clear records of DEI program decisions
   • Keep detailed board minutes showing careful consideration of legal requirements
   • Create clear paper trail of compliance efforts
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3. Prepare for Renewals:
   • Gather data on DEI program changes
   • Document risk management procedures
   • Be ready to explain your approach to underwriters

Our Take

While it's too early to predict exactly how these changes will affect D&O coverage, one thing's clear: financial institutions need partners who understand these emerging exposures.

We're actively working with carriers to explore potential coverage solutions through:

• Coordinated program structures
• Coordination of excess layers

Looking Ahead

The DEI exposures will likely continue to increase. Smart financial institutions are getting ahead of these changes now.

Want to discuss how these developments might affect your D&O program? Contact LION Specialty for a comprehensive review of your coverage.

D&O Considerations for Initial Public Offerings

The IPO market is heating up.

NYSE reports 170 companies in the public IPO pipeline, with another 200+ in the "shadow backlog" preparing to list (source). A large portion of these companies are Fintechs seeking to capitalize on stable interest rates and renewed investor confidence.

The Private-to-Public Insurance Gap

The transition from private to public company creates exposures that your current insurance program probably isn't built to handle.

The basic functions might be similar, but the regulatory requirements, stakeholder expectations, and risk exposures are in a different league entirely.

Here's what changes:

1. Heightened Scrutiny:
   SEC review cycles now average 5 months, with intensified focus on financial disclosures
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2. New Stakeholders:
   Public shareholders bring different expectations and litigation risks
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3. Expanded Reporting:
   SOX compliance requires robust controls and documentation
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4. Personal Liability:
   Directors face increased exposure to shareholder suits

So What?

This matters because over 60% of IPO-related lawsuits target directors for alleged disclosure failures. And these aren't small claims - they can threaten both corporate and personal assets.

Three specific pressure points emerge:

1. Prospectus Liability

Your D&O policy might not fully protect you here. You have two main options:

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2. Control Systems

Public company status demands:

• Enhanced financial controls
• Documented governance procedures
• Regular SEC reporting capabilities

3. Board Protection

Your directors face new exposures from:

• Shareholder suits
• Regulatory investigations
• Public disclosures

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What Should You Do?

Three immediate steps:

1. Review Your Coverage Structure
   • Evaluate D&O limit adequacy for public company exposures
   • Consider your lead carrier, do they have IPO appetite
2. Map Your New Exposures
   • Identify gaps between private and public coverage
   • Review entity vs. individual protection
   • Plan for increased regulatory scrutiny
3. Build Your Risk Management Framework
   • Establish disclosure controls
   • Document governance procedures
   • Create incident response protocols

Our Take

The IPO surge offers tremendous opportunities for fintech companies and traditional financial institutions.

Yet the insurance implications extend far beyond just buying more coverage.

You need a strategic approach that:

• Protects both corporate and personal assets
• Addresses specific IPO exposures
• Scales with your public company growth

Having guided dozens of financial institutions through successful IPOs, we've learned that preparation is everything.

The time to address these issues is before you file, not after.

Want to stress-test your IPO insurance strategy? Contact LION Specialty for a confidential review of your coverage and risk management approach.

Going public transforms your risk profile. Make sure your insurance program is ready for the transition. Book a consultation here.

Private Equity's Risk Play: Buying College Sports Teams Without a Rulebook

College sports aren't just about the game anymore.

With billions flowing into Name, Image, and Likeness (NIL) rights, private equity firms are eyeing a new market: buying stakes in college sports programs.

But there's a problem: No regulatory framework exists to govern these deals.

Why This Matters to PE Firms

The NCAA's recent $2.8 billion NIL settlement is just the beginning. (source)

College sports are now a business, and investors are acting fast. But investing in a space with no clear ownership structures, undefined financial liabilities, and regulatory uncertainty is a high-stakes gamble.

4 Key Risks for PE Investors in College Sports

1. No Rules of the Road –
   NIL collectives operate in a grey zone. Most present as nonprofits while functioning like talent agencies - a structure that's drawing IRS attention.
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2. Multiple Exposure Points –
   From donor disputes to tax compliance, these organizations face exposures that traditional nonprofit insurance wasn't designed to address.
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3. State-by-State Chaos –
   32 states have their own NIL regulations. 18 have none. This creates a complex compliance landscape.
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4. Uncertain Revenue Models –
   Unlike pro sports teams with fixed contracts, college sports funding relies on donors, sponsorships, and unpredictable NIL payouts.

So what?

NIL collectives are becoming major players in collegiate sports - and they're looking to financial institutions for support.

Case Study: The UNLV Quarterback Dispute

A $100,000 NIL payment was promised to a quarterback—but never materialized. The fallout? Legal confusion over who was responsible and who could be sued.

If PE firms begin acquiring stakes in programs or NIL collectives, they could face similar disputes without insurance coverage or contractual protections.

With no legal precedent, these questions remain open.

What PE Firms Need to Do Now

1. Assess Risk Exposure
   • Map potential investments in NIL collectives and college programs.
   • Review existing portfolio exposure to illiquid sports-related investments.
   • Identify regulatory gaps that could affect liability.
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2. Adjust Due Diligence Approaches
   • Redefine underwriting criteria for sports investments.
   • Strengthen contractual protections against NIL-related lawsuits.
   • Examine state-specific compliance challenges.
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3. Secure Specialized Coverage
   • Traditional D&O and E&O policies may not apply to NIL-related disputes.
   • Consider customized liability coverage for NIL investments.
   • Review potential tax and legal complications tied to college sports entities.

What Makes NIL Different?

Three factors make these organizations particularly risky:

1. Performance Measurement:
   Many state laws prohibit tying compensation to athletic performance, potentially making traditional metrics obsolete.
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2. Multiple Sophisticated Stakeholders:
   Donors, athletes, schools, and regulators all have different expectations and rights.
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3. Regulatory Flux:
   With varying state regulations and no federal framework, compliance remains uncertain.

Looking Ahead

NIL investment is a frontier market—and like all frontiers, it's unpredictable.

In a space with no legal precedent, waiting for claims to happen isn't a strategy.

PE firms that act now—by structuring deals intelligently and securing the right coverage—can seize opportunities while mitigating unforeseen financial exposures.

Think of it like building a boat - you want to seal the leaks before you hit rough waters, not during the storm.

Want to assess your firm's exposure in this evolving space? Contact LION Specialty for a consultation on risk mitigation strategies.

The Bottom Line:

If you're a director or officer at an FI - Your personal assets are on the line if your company faces a major claim.

That's why we created the D&O Contract Vigilance Blueprint, a free 5-day email course to help you...

• Secure better D&O insurance:
  Learn how to avoid common policy mistakes and identify overlooked coverage gaps.
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• Protect your personal assets:
  Understand your potential liability and take steps to mitigate your risks.

​>>> Get the D&O Contract Vigilance Blueprint​

Don't wait until a claim hits to find out you're under-protected.

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Stay Covered,

Natasha & Mark

Co-Founders and Managing Partners LION Specialty

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