In 1990, I was on the team at Risk Management Solutions, one of the earliest venture-funded insurance-focused startups. At the time, there were virtually no tech VCs who had ever invested in insurance. Most firms were reticent to even speak with us, believing we would be swallowed by the bureaucracy and slow decision-making of insurance carriers and the tough regulatory scene. Fortunately, much has changed since then – both in venture and in the breadth of industry-specific technology startups – but the tried and true formula for successful venture capital investments hasn’t. This bodes well for insurtech, because the opportunities are plentiful and the industry is far more receptive to change than people used to believe.

The most successful venture investments are usually those that exhibit compelling business opportunities and are led by exceptional management teams. However, behind these basic characteristics, foreseeing what differentiates winning investments in insurtech is certainly enhanced by a deep understanding of the subtleties of the insurance industry. At XL Innovate, we are a venture firm focused exclusively on insurtech, and invest only in the property and casualty sector. We believe that the value creation opportunity is large, and that the current venture creation trend will extend for a long time. Based on the current dynamics of the insurance industry, we have developed an approach to assessing what characteristics lead us to want to invest in a particular venture.

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