D&O for Start-ups

If you’re a founder or an executive, there’s a good chance you’ve heard of “Directors & Officers” (D&O) insurance. In fact, many companies are legally required to have a D&O policy by their shareholders agreement.  Buying a D&O policy in the UAE is not an easy process, so we’ve come up with a solution!

What is D&O insurance?

In simple terms, D&O insurance is a solution covering a company’s board of directors and executives against the cost of legal action and/or financial settlement resulting from a lawsuit filed against them by customers, shareholders or a third party.

One of the latest and most publicized examples of D&O insurance is Tesla’s shareholders suing Elon Musk in 2019 from a statement made on social media. Tesla paid a USD 20 million settlement and called on their D&O policy to cover the costs attached to this lawsuit.

Why do I need a D&O policy?

You may not have a choice. Many shareholders’ agreements require the company to have a D&O policy. Investors use it as a risk management tool to protect themselves, the board, founders and the executive team from lawsuits. In addition, it prevents having to liquidate the company to pay a legal claim or settlement.

In a fast-paced business environment, a D&O insurance policy allows the board and executives to act decisively and react quickly.

Keep in mind that in some industries such as real estate, consulting and financial services, a D&O policy has become a requirement to bid for large tenders.

How do I buy D&O insurance?

Buying a D&O policy in the UAE, if you’re not an established company, can be very painful. To give you an insight, we experienced this firsthand at Bayzat while closing our Series B round.

Since most insurers use standard risk evaluation models, based on traditional financial risk and exposure assessment, it is not relevant to fast-growing startups. In return, most insurance companies actually refused to work with us!

As a result of this experience, we decided to build a tailored solution for fast-growing startups with an A-rated insurance partner. Instead of traditional metrics like profitability, the focus will be on the specifics of your startup model. We will be taking into consideration qualitative metrics such as the experience of the Board members, growth trajectory and more. 

For more information on getting your D&O policy today, reach out to us on: saif.abuqurah@bayzat.com.