How to Overcome the Challenge of Rising Insurance Rates

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In today’s world of corporate transparency and accountability, an organization’s directors and officers are exposed to a myriad of risks. Regardless of a company’s size or mission, the legal costs associated with litigation can be devastating to both the organization and its directors and officers.Many people believe that directors and officers (D&Os) Only required for listed companies. However, privately held organizations can become victims of lawsuits that may affect the company, its officers, and its board of directors. D&O Insurance is needed.

Benefits D&O insurance can offer private companies:

  • Warranty against manufacturing or manufacturing defects
  • reimbursement of legal costs
  • Coverage for regulatory exposures
  • Improved ability to attract new directors
  • peace of mind

Related: Get an insurance quote that fits your needs!

Unfortunately, the D&O market has recently been severely impacted by the COVID environment, causing rate increases, tighter underwriting and reduced market capacity. Below is an example after a $20 million D&O policy update offering an increase of $140,000 (111%). I was asked for a second opinion and a last-ditch effort for the insured as the policy was set to expire within 48 hours. In the absence of other options, the insured would be forced to lower the limit to make renewal premiums affordable.

Part of the problem was that, in addition to the difficult market, poor insured performance also contributed to this significant increase. The current broker collected the renewal application and financial information, but did not discuss further with the insured before placing the account on the market and returning a quote.

When Bryson asked the insured about their financial outlook for the next 12 to 18 months, the insured said it had completed a recent capital raise and the company would receive a seven-figure amount in the next month.Updated with further discussion Data on next year’s plans and current investors. Many of them are accredited.

Current brokers have made a serious mistake in the renewal process by not collecting relevant data that we know can make a big difference to their marketing efforts. Much depends on the underwriter’s ability to judge the performance of the medium-term company.

The solution is based on trust in the PE firm’s due diligence process, focusing on private equity backed businesses, along with strong relationships with new D&O carriers offering aggressive rates, as well as full financial control of the firm. The prospect was to approach the insurance company. , which allowed the insured to save him more than $150,000 on renewal while still offering his full $20 million limit, which the original renewal estimate had reduced him to $15 million.

Although the insured was not backed by private equity, it turns out that the insurer is considering companies with accredited investors. With new, forward-looking financial details and a proactive career mindful of risk, we got to work closing the deal within 48 hours of her.

Takeaway

  1. Applications and finances don’t tell the whole story
  2. Be an advocate for insurers and partner with brokers who specifically understand D&O insurance
  3. Make sure the broker has strong relationships with carriers with innovative prospects

Many private companies do not consider D&O insurance necessary, but this can have very dangerous consequences. D&O lawsuits can happen without warning, and he could easily reach six figures, draining corporate management’s personal assets.

Please contact Bryson at info@brysonfinancial.com to learn more about D&O insurance to protect your company and management.

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