Insurance Needs of Private Equity Firms


Private equity firms and venture capital companies have both become increasingly popular in recent years. Many business models depend on the support of these investors, so it makes sense that they need more substantial insurance coverage than in the past, as well. In this post, we'll focus on private equity firms and their options when it comes to key insurance coverage.

What is Private Equity?

Private equity refers to a shared interest in companies that are not publicly listed or traded. Typically, high-net-worth individuals and institutional investors provide the investment capital for these private companies. The private-equity industry mainly consists of large firms backed by accredited investors who provide substantial amounts of funding and receive a share in the profits earned (carried interest) as well as a periodic management fee from each private equity fund managed.

In terms of how private equity firms invest, it differs from firm to firm. Because private equity firms are heavily involved in investment activities, they face certain exposures capable of devastating the firm and any associate companies. For this reason, private equity firms need to protect themselves with the right insurance coverages against losses caused by indemnity or financial solvency risks, on both the business and governance sides.

Key Insurance Coverage for Private Equity Firms

Professional Liability

Professional Liability Insurance, commonly referred to as "malpractice" insurance or more formally as Errors & Omissions (E&O) insurance, plays a crucial role in protecting private equity firms from potential claims alleging improper conduct or any wrongdoing.

Directors & Officers' Liability

Directors and officers of a business are subject to the possibility of being sued personally for their actions. Directors and Officers Liability Insurance protects these individuals and the company in case litigation arises, as well as reimbursing losses. Because private equity professionals serve as directors or officers of their portfolio companies, this type of coverage serves as vital protection.

Employment Practices Liability

Employment Practices Liability Insurance provides coverage for allegations against the insured company or individual regarding employment practices. EPL covers private equity firms against claims such as wrongful termination, discrimination, sexual harassment, retaliation, and more. 

Fiduciary Liability

If a claim is made against your private equity firms, this type of insurance covers legal expenses and financial losses the plan may have incurred. Coverage is provided to fiduciaries (those who manage the plans), professional administrators and trustees, employers, etc.

Cyber Liability

Protecting your private equity firm from cyberattacks and data breaches is critical in today's technologically advanced world. Cyber Liability Insurance aims to offer protection from the substantial impact of cyberattacks.

Private Equity Insurance

Going forward, both private equity and venture capital firms will require proper financial protection for the risks they face. And that’s why insurance coverage has been and is still vital for these firms. It gives everyone involved the peace of mind they need to carry on their day-to-day business with full confidence. 

As a boutique insurance agency, the protection of you and your private equity firm is our highest priority. We'll help you navigate through a variety of options and select an insurance plan to protect what matters most – like you, your family, your home and business, and your hobbies. Contact Highline Risk Solutions today to discuss your insurance needs. 


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