Ben Jennings, chief revenue officer at Embroker, said: "Founders are feeling the pressure; not only are they worried about capital insecurity, but they also have to consider how the decisions and actions of others can impact their business in the blink of an eye." (Credit: Philip Pacheco/Bloomberg)
In the aftermath of Silicon Valley Bank's collapse in early March, venture capital-backed startups quickly moved to increase insurance coverages, according to Embroker Insurance Services LLC, which reported demand was particularly strong for director and officer policies.
Four days after SVB's collapse, quotes generated on Embroker's platform for D&O policy with $3 million limits more than doubled. Just 10 days after the bank's fall, similar quote searches increased 62%.
Prior to the bank's failure, around 60% of D&O quotes generated were for a $1 million limit, while 12% of startups were looking for $2 million limits and 19% sought $3 million limits, according to Embroker.
However, the scramble to secure higher limit policies did cause declines in quotes generated for policies with coverage amounts of $1 million. For example, quotes for D&O policies with $1 million limits dipped 37% at the time higher limit policy demand was growing.
Once startups had a chance to process SVB's collapse, demand returned for policies offering $1 million limits, according to Embroker. The surge in demand for higher coverage limits indicated that startups were reacting to the bank's failure without fully considering the full costs of higher limits.
"Founders are feeling the pressure; not only are they worried about capital insecurity, but they also have to consider how the decisions and actions of others can impact their business in the blink of an eye," Ben Jennings, chief revenue officer at Embroker, said in a release. "Those lucky enough to not be directly impacted by the SVB collapse see what's happening to their peers, and they're shopping for higher quotes in hopes it prepares them for a similar situation."
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