January 12th, 2016
First, I want to observe that for some prospective clients, apparently the word 'crowdfunding' is like calling someone a racial slur or something. I am learning to be very cautious because many companies don't want to associate themselves with activity that may be considered questionable at best and fraudulent at the worst. I am going to stick with alternative finance for a while because no one seems offended by that.
I have spoken to two different underwriters this week that are looking at a Reg A+ company. It is good to know that these companies raising capital are considering the importance of D&O insurance. In both cases, the underwriters declined the risk after considering the underlying business fundamentals. At the end of the day, the overall strength of the business is the relevant underwriting factor and not the type of capital raise. Although one underwriter did express his concern that the company was crowdfunding their working capital. I think the underwriter was hoping to see a little more boot strapping before bringing in outside investors.
The other observation I will make is that the platforms that purchased comprehensive D&O and Professional Liability coverage in the past year are experiencing a modest increase from the available markets. I think that the appetite for platforms has not caught up with the quantity and thus there is not much downward pricing pressure. We continue to pursue multiple markets and encourage carriers to join the party. There are so many platforms that need coverage, we believe that carriers can obtain some critical mass and spread the risk out over multiple clients. We hope to have two additional markets actively quoting deals in the next quarter. Stay tuned. We are working on a platform now that is bare. Waiting to see what the market supports.
A few interesting articles on 'crowdfunding' trends: Is Crowdfunding a "fad"? Click Here
Real Estate Crowdfunding Updates - Click Here
Another Real Estate Update - Click Here
Monica M. Minkel, RPLU, MLIS, cyRM, CPLP has been working exclusively with Directors & Officers Liability, Professional Liability, Cyber Liability and related products for nearly 20 years. She started her interest in finance by loaning money to her mom at age 11 (complete with a loan agreement and competitive interest rate). She is passionate about all things in the financial industry and the way technology is changing the way capital markets function.