Author: Priya Cherian Huskins
While 2025 was a rebound year for special-purpose acquisition company initial public offerings (SPAC IPOs), 2026 is shaping up to be a year of expansion.
According to SPAC Insider, more than 80 SPACs have gone public as of May 4, 2026,1 which averages to about 20 SPAC IPOs per month.
If this pace holds, we're on track for more than 200 SPAC IPOs in 2026. According to the data, the average size of a SPAC IPO in 2026 is about $210 million.
As my colleague Yelena Dunaevsky pointed out in a 2026 forecast conversation with Doug Ellenoff of the law firm Ellenoff Grossman & Schole LLP, litigation risk is trending favorably for SPACs as well.
More recently, we've seen fewer and/or less severe lawsuits around SPAC transactions, possibly reflecting better discipline, clearer rules and a more stable market environment for SPACs.
According to our data team, SPAC-related securities class actions accounted for only roughly 2% of Subsidiary Controlled Affiliation (SCA) filings, with approximately 45% dismissed at an early stage.
This change is an encouraging shift in the litigation environment, though not a reason to become complacent when it comes to litigation risk mitigation and transfer.
In addition, it seems the regulatory environment has become more constructive under the current administration's Securities and Exchange Commission (SEC) chair.
A downward litigation trend certainly helps when it comes to the pricing of Directors and Officers (D&O) insurance. Insurance carriers in 2026 also have more historical data to assess how older claims developed, giving them a better view of the real spectrum of SPAC risk.
The good news? Pricing is so much better than it was during the last round of SPAC enthusiasm. Unlike at the height of the last SPAC bubble in 2021, D&O insurance premiums are no longer an enormous impediment to funding a successful SPAC IPO.
The 2026 edition of Gallagher's Guide to D&O Insurance for SPAC IPOs provides timely and practical guidance for teams navigating this next wave of SPAC activity.
Get the full report now. You can also keep reading for highlights.
Common risks in the SPAC lifecycle
While litigation and regulatory risks for SPACs may ebb and flow over time, the core areas of exposure for SPAC IPOs tend to remain the same.
Some of these risks include:
- Merger objection lawsuits. Often filed immediately after a deal is announced, these suits typically allege insufficient disclosure. Many are resolved quickly with additional disclosure and a mootness fee — a de facto "M&A tax" that companies now work into their budgets.
- Securities class actions. These more serious lawsuits can target the SPAC, its board, its sponsor and the target company. Allegations typically focus on material misstatements or omissions and can arise even before a merger closes.
- Breach of fiduciary duty claims. Plaintiffs' attorneys are much less focused on SCAs and are more focused on filing fiduciary duty suits, either directly or derivatively. Delaware Chancery Court is the preferred venue for plaintiffs because, when a Delaware Chancery Court determines that the "entire fairness" standard applies to SPAC-related fiduciary duty claims, these lawsuits become extremely difficult to dismiss early. Conflicts of interest between sponsors and shareholders remain a core theme. (Note: The vast majority of newly formed SPACs are now being formed outside of Delaware.)
- Creative and novel theories. Plaintiffs' lawyers will continue to explore new angles of attack, as they did during the last SPAC wave.
- Regulatory enforcement actions. Agencies such as the SEC, the Department of Justice (DOJ) and the Financial Industry Regulatory Authority (FINRA) haven't forgotten the excesses of the past and continue to actively monitor the space. In past years under a different administration, enforcement actions expanded beyond the SPAC sponsors and targets to include advisers, underwriters and others involved in the transaction process.
Navigating D&O insurance for SPACs in 2026
D&O insurance is critical when it comes to managing a SPAC's ongoing risks and protecting its directors and officers.
The good news is that we're currently in a buyer's market. That said, it takes careful planning to take full advantage of these improved conditions.
As my colleague Yelena Dunaevsky pointed out in her conversation with Doug Ellenoff, carriers are ruthlessly competing on price but also hedging their risk by reducing coverage: "A rock‑bottom premium on a policy may sound great for your bottom line, but it can quickly backfire when a claim comes in and you discover that the policy is full of holes."
It's worth noting that if the pace of new SPAC IPOs continues or even accelerates, the second half of 2026 could see the D&O market potentially start to firm.
Early engagement matters
As you navigate your SPAC IPO, engaging with a knowledgeable D&O insurance broker early in the SPAC formation process is key. Ideally, this engagement would happen before your confidential Form S-1 filing.
Early engagement helps ensure you have time to explore strategic options for structuring the insurance program and negotiating the best terms.
What do carriers look at when evaluating SPACs for a D&O insurance program? Today, they focus on several key factors:
Sponsor team experience. Underwriters favor teams with prior SPAC success, public company leadership or strong industry expertise. Inexperienced teams may face higher premiums and less favorable terms.
Jurisdiction of incorporation. SPACs based in the Cayman Islands are generally viewed more favorably than those incorporated in Delaware for the reasons discussed above.
Capital raised in the IPO. Larger offerings are seen as riskier from a claims perspective, which can lead to higher D&O premiums.
Redemption mitigation plans. Insurers expect to see a credible strategy to address high shareholder redemptions, which can threaten deal viability and increase exposure.
Length of investment period. SPACs with very short timelines (e.g., 15 to 18 months) are seen as riskier, particularly in a market where sourcing and closing deals is increasingly complex.
Access the Guide to learn more
Inside Gallagher's 2026 Guide to D&O Insurance for SPAC IPOs, you'll find practical guidance on how to navigate the SPAC insurance lifecycle, with key milestones on the road to going public.
More insights from the Guide include:
- How to structure your D&O insurance program from the ground up, including timing your placement
- Strategies for negotiating total policy limits, balancing ABC coverage and evaluating Side A-only options
- Best practices for minimizing self-insured retentions (deductibles) and securing favorable premium terms
- How to handle the tail policy (runoff coverage) when your business combination closes
- Insurance diligence tips for evaluating your SPAC's merger target, and why gaps in the target's insurance program matter
- How to manage shareholder lawsuits and regulatory investigations at the time of deal announcement, including claims handling and defense counsel selection
- How Reps and Warranties Insurance (RWI) can protect your deal
- D&O insurance considerations for the post-merger public company
- Key questions to ask when choosing your D&O insurance broker and the mistakes to avoid
Get the full Guide now to learn more.
Published May 2026
