- Tesla said Tuesday that CEO Elon Musk is insuring the company’s directors, citing high premiums from insurance companies.
- The billionaire pledged 54% of his stake in Tesla to make the offer, up from 40% in 2018.
- No stranger to high insurance costs, Tesla launched an insurance offer for homeowners in California last year.
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Tesla’s chief executive and largest shareholder, Elon Musk, will personally guarantee the responsibility of the board of directors because of the high premiums quoted by insurance companies.
On a update of its annual report filed with federal regulators on Tuesday, the company said it “decided not to renew its liability insurance policy for directors and officers for 2019-2020 due to disproportionately high premiums cited by insurance companies”.
“Instead,” the company said, “Elon Musk agreed with Tesla to personally provide coverage substantially equivalent to that policy for a period of one year, and the other members of the Board are third party beneficiaries.”
Tesla also said the deal 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 a massive uprising in the council after an agreement with regulators in 2018.
The move is made possible by Musk’s pledge to use 54% of his 24 million shares as collateral to provide insurance coverage, according to the document. This represents a 40% increase at the end of 2018, according to an analysis by Bloomberg News.
Musk’s reticence to use traditional insurance options may be new to the company’s board practices, but it is not uncommon for the entrepreneur.
In 2019, the company launched a Tesla brand insurance offering for California homeowners after many high insurance costs partly due to the relative difficulty of finding qualified spare parts and workshops.
Tesla will release its first quarter financial results on Wednesday night.