Public Offering of Securities Insurance (POSI)
Protect Your Board Through The Listing
An offer document makes hundreds of statements about the business, its risks and its numbers. If investors later say something was misstated or left out, they can pursue the company, its directors and its promoters. Public Offering of Securities Insurance (POSI) covers defence costs and compensation for those prospectus claims. MILES works with the company, its legal counsel and bankers to size the limit, align it with D&O cover and place it before the offer opens.
What POSI Covers
Company Securities Claims
Claims against the issuing company alleging misstatement or omission in the offer document or related marketing material.
Directors And Officers
Personal protection for directors, key managerial personnel and officers named in claims arising from the offering.
Promoters And Selling Shareholders
Cover for promoters and selling shareholders named in the offer, where the insurer agrees to include them.
Defence Costs
Legal fees and costs to defend investor suits, class actions and regulatory proceedings linked to the offering.
Multi-Year Policy Period
A single policy that typically runs for several years from the offer date, matching the period when claims arise.
Dedicated Limit
A separate limit ring-fenced for the offering, so a prospectus claim does not erode your annual D&O cover.
What is Public Offering of Securities Insurance?
Public Offering of Securities Insurance, or POSI, is a liability policy that protects a company, its directors, officers and promoters against claims alleging that the offer document for an IPO, FPO or QIP contained a false or misleading statement or omitted a material fact. It pays defence costs and any settlement or award, subject to the policy limit.
It is usually bought as a one-off, multi-year policy linked to a single offering. It sits alongside the annual directors and officers liability insurance policy and forms part of a wider liability insurance programme for a listed or soon-to-be-listed company.
Why the risk exists
Indian company law and SEBI’s regulations for capital issues place responsibility for the accuracy of the offer document on the company, its directors and its promoters. Investors who buy shares on the basis of the document may bring civil claims if the share price falls and they believe a disclosure was wrong. The regulator can also start proceedings. Even claims that are eventually rejected take years and significant legal fees to defend.
Many annual D&O policies exclude or restrict claims arising from a public offering, or cover them only if the insurer is told in advance and an extra premium is paid. That is the gap POSI fills.
What the policy covers
- Securities claims brought by investors or shareholders relating to the offering.
- Regulatory investigations and proceedings linked to the offer, where the wording extends to them.
- Defence costs, often paid as they are incurred rather than at the end.
- Individual insureds: directors, independent directors, key managerial personnel and, if agreed, promoters and selling shareholders.
- The company itself for its own liability in a securities claim.
- Road-show and marketing material connected to the offering, depending on the wording.
What is not covered
- Fraud, dishonesty or deliberate breaches, once established by a final judgment.
- Personal profit or advantage to which the insured was not legally entitled.
- Fines and penalties that cannot be insured under Indian law.
- Claims about matters already known to the insured before the policy started.
- The portion of the offer price that represents the return of money investors paid, in some wordings, as it is treated as uninsurable restitution.
Who needs POSI
- Companies filing for an IPO on the main board or SME platform.
- Listed companies raising funds through an FPO, QIP or rights issue.
- Promoters and selling shareholders selling through an offer for sale.
- Independent directors who want certainty that their personal assets are protected before signing the document.
How the limit and premium are decided
There is no fixed rule. Underwriters consider the issue size, the expected market capitalisation, the sector, the quality of the offer document and the diligence carried out by the legal advisers and lead managers. Governance matters as well: board independence, audit committee strength and any past regulatory actions.
| Structure choice | What to consider |
|---|---|
| Standalone POSI | Separate limit for the offering; annual D&O stays untouched for other claims. |
| Extension to D&O | Simpler, but the offering shares the D&O limit and renewal terms may change. |
| Policy period | Usually several years from the offer date; confirm the exact term with the insurer. |
| Insured persons | Decide early whether promoters and selling shareholders are included. |
Retentions for the company and the policy period vary by insurer and by offering.
What we need for a quote
- Draft red herring prospectus or placement document.
- Issue size, structure and expected timeline.
- Latest audited financials and shareholding pattern.
- Board and key management details.
- Current D&O policy schedule and wording.
- Details of any pending litigation or regulatory matters disclosed in the document.
How MILES helps
- We engage early, ideally when the draft document is being prepared, so cover is bound before the offer opens.
- We compare POSI terms from several insurers on insured persons, regulatory cover, allocation and exclusions.
- We check that POSI and your annual D&O fit together without gaps or overlaps.
- We coordinate with your legal counsel and company secretary on the underwriting questions.
- If a claim is made, our claims team supports notification and liaison with the insurer and defence counsel.
Cover, exclusions and premiums depend on the insurer’s policy wording and underwriting. MILES Insurance Brokers Pvt. Ltd. is an IRDAI-licensed direct broker (Life & General, Reg. No. 954); the insurance is issued by the insurer. Insurance is the subject matter of solicitation.