Inside private equity’s D&O risk: Why off-the-shelf coverage isn’t enough

This article was produced in partnership with Amwins.

Private equity (PE) ownership reshapes the governance profile of a business, and with it, the directors & officers (D&O) risk.

Mergers and acquisitions, debt financing, and board appointments all increase the likelihood of claims, particularly when deals sour or minority shareholders feel disadvantaged.

Amwins specialists spoke to Insurance Business about the risks, pitfalls, and opportunities in this evolving market, and why wholesalers play a critical role in securing the right coverage.

The unique risks of private equity ownership

According to Corey Turner (pictured on the left), vice president with Amwins Brokerage in Atlanta, GA, the unique structure and transactional nature of private equity deals create exposure patterns that don’t fit neatly within a standard private company D&O policy.

“Private equity firms almost always take control positions,” Turner explained. “They own the majority of equity, appoint individuals to the portfolio company’s board, and bring debt into the equation. All of that creates boardroom risk, transactional risk, and insolvency risk.”

Unlike traditional private companies, PE firms operate in a constant cycle of raising capital, acquiring portfolio companies, and planning eventual exits. This dynamic creates several layers of D&O exposure.

Because PE professionals are directly appointed to boards, coverage needs to protect both the firm’s investment and the personal liability of individuals. Overlapping exposures between the PE parent and its portfolio companies further complicate matters, and often a single claim may trigger both policies.

Philip Collins (pictured on the right), executive vice president at Amwins Brokerage in Franklin, TN, added: “Unlike a traditional private company that might plan to operate indefinitely, PE firms are always thinking about an exit. So, policies for portfolio companies often include provisions that anticipate a future sale.”

Despite a slowdown in M&A last year, claims around failed deals or roll-up strategies have been on the rise, Collins warned. “In some cases, sellers allege misrepresentation or claim the PE firm never intended to close, only to gather competitive intelligence.

“A lot of these claims mirror those seen at traditional private companies, but they’re elevated in PE-backed firms because of the transactional nature of the business.”

Why standard D&O policies miss the mark

These are a few reasons why off-the-shelf private company D&O forms don’t accurately address PE ownership dynamics. According to the Amwins experts, there are three recurring pitfalls in standard D&O policies:

1. Exclusions – “Typical private forms can carry antitrust/unfair trade exclusions and harsher breach-of-contract language,” Turner noted. Those can be material in consolidation plays or commercial disputes that often surround roll-ups and add-ons.
2. Poor sponsor-portco alignment – Without explicit coordination language, defense and indemnity can be delayed or disputed when both policies are implicated. “You need coverage that dovetails cleanly between sponsor and portfolio company’s programs so there’s no finger-pointing in a joint claim,” Turner said.
3. Endorsement sprawl – Trying to retrofit a standard form with 40-60 endorsements raises the potential of conflicts, gaps, or administrative errors, especially under deal pressure.

“A decade ago, D&O was treated like a checkbox. That’s changed,” Collins told Insurance Business. “Over the last 8-10 years, PE firms have recognized how different policy forms can be, and they want quality control.

“Even with a slowdown in M&A, there’s more focus on coverage terms and limits. A million-dollar off-the-shelf policy doesn’t cut it anymore. Firms are buying higher limits and other products that they might not have considered in the past.”

Amwins’ answer to the evolving needs of PE firms is an exclusive manuscript D&O form purpose-built for portfolio companies. Some of the key benefits for insureds are consistent terms across carriers, easier customization, and fewer conflicts.

“We took the best coverage elements in the market and drafted them into one clean policy instead of stacking dozens of endorsements,” Turner said.

“Multiple insurers back the form, so when we go to market, about 95% of what comes back is consistent. Limits, retentions, and price may differ, but the coverage is materially the same.”

Amwins’ value: Scale, speed and specialization

A bespoke form is only as good as the market support behind it. Here, Amwins can play a key role. As the largest US wholesaler, Amwins aggregates enough deal flow to persuade multiple carriers to back a common manuscript framework and keep terms aligned.

Amwins’ dedicated D&O teams know which clauses underwriters will stretch for and where they won’t. “We work on portfolio company D&O every day, so we know which coverage terms matter most and which markets will provide them,” said Turner.

Wholesalers also add value during the transaction. “M&A deals move fast, and D&O is just one of many moving pieces,” Collins pointed out. “Amwins knows what underwriters care about and what doesn’t matter, so we can cut through the noise and deliver quickly. That takes pressure off retailers and their clients.”

Today’s PE clients expect broader coverage, higher limits, and seamless coordination between sponsor and portfolio company. For retail insurance brokers, that means understanding the pitfalls of standard forms, recognizing when manuscript coverage is necessary, and leaning on wholesalers who can deliver specialized expertise and market access.

Learn more about Amwins’ exclusive D&O solution for private equity portfolio companies here.