Elon Musk is personally insuring Tesla's board members due to 'disproportionately high premiums' quoted by insurance companies

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Elon Musk is personally insuring Tesla's board members due to 'disproportionately high premiums' quoted by insurance companies
Tesla CEO Elon Musk.REUTERS/Steve Nesius

  • Tesla said Tuesday that CEO Elon Musk is insuring company directors, citing high premiums from insurance companies.
  • The billionaire pledged 54% of his stake in Tesla to make the offering, up from 40% in 2018.
  • No stranger to high insurance costs, Tesla last year launched an insurance offering for owners in California.
  • Visit Business Insider's homepage for more stories.

Tesla's chief executive and largest shareholder, Elon Musk, will be personally insuring its board of directors' liability because of high premiums quoted by insurance companies.

In an update to its annual report filed with federal regulators on Tuesday, the company said it "determined not to renew its directors and officers liability insurance policy for the 2019-2020 year due to disproportionately high premiums quoted by insurance companies."

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"Instead," the company said, "Elon Musk agreed with Tesla to personally provide coverage substantially equivalent to such a policy for a one-year period, and the other members of the Board are third-party beneficiaries thereof."

Tesla also said that the arrangement is not a conflict of interest for independent directors, including new member Hiro Mizuno who joined the board on April 23. His arrival signals a possible end to massive upheaval on the board following a settlement with regulators in 2018.

The move is possible thanks to a pledge by Musk to use 54% of his 24 million shares as collateral to provide the insurance coverage, according to the filing. That's up from 40% at the end of 2018, according to an analysis by Bloomberg News.

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Musk's reticence to use traditional insurance options might be new to the company's board practices, but isn't unusual from the entrepreneur.

In 2019, the company launched a Tesla-branded insurance offering for owners in California, after many dealt with high insurance costs due in part to the relative difficulty of finding replacement parts and qualified body shops.

Tesla will report its first quarter financial results on Wednesday evening.

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