Insurtech is firmly entering a "bandwagon phase" with lots of venture capitalists and legacy companies looking high and low for investment opportunities. And, says Martha Notaras, partner at XL Catlin’s investment arm XL Innovate, there's no sign of the industry losing interest any time soon.
There are two key reasons that insurtech is so hot right now, Notaras explains. First, venture capital companies and insurers alike have lots of cash available to support startups. And, with the industry facing intense disruption from changing consumer preferences and advancing technology, insurers are more than willing to cooperate with startups on proof of concepts to spur innovation and gain a market advantage.
The pressure is so great, Notaras says, that some insurers aren't even bothering to set up dedicated venture funds. Instead, many companies are making investments straight out of the main business fund as desired.
“A number of insurance companies have a venture fund,” she says. “But some funds are so big, they can’t be funds... [those carriers] must be investing off the balance sheet.”
XL innovate has made eight venture capital investments in insurtech companies since launching in March 2015, Notaras says. The most recent one, announced last week, is GeoQuant, which applies artificial intelligence to big data in order to map and anticipate geopolitical risk. Other recipients include Lemonade, Slice Labs, Cape Analytics and Notion.
“We’re not done yet,” she says. “We’ve got a couple of companies we’re looking at right now and a long runway in this business.”
However, Notaras declined to comment on the companies XL Innovate is eyeing, or a timeline for the next announcement. But did say she expects to liquidate all investments over time and reinvest in the insurtech sector.
“We do like cutting-edge tech, but on the other hand we also see that thoughtful application of technology that exists in other industries can really bring economic benefits to incumbent insurers,” Notaras said.
Startups with new business models and that are focused on data & analytics are of particular interest to XL Innovate. The flexibility to pivot on tech strategy when required and the acceptance of guidance from board members are also important to the firm.
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