Hello Friends!  Another big earnings week has come to a close and we once again bring you the story of the industry summarized into themes.  Insurtech investments continue and favor the focused ventures, earnings continue without surprises and the ongoing Vesttoo scandal continues to ripple throughout the insurance industry with the expectation that more is to come.  So let’s delve into the three things we learned this week:

 [1]

Insurtech Investment Slows, but Not Interest on Focused Ventures

The Gallagher Re Global InsurTech report for Q2 2023 continues to show the positive shift in insurtech investment, with a ‘healthy inflection point’ and ‘a downturn in speculative investment capital’.  Startups focusing on specific insurtech niches outperform mere technology disruptors. Overall funding declined by 34%, but early stage funding now accounts for 14.7% of total funding, showcasing increased interest in nurturing promising ventures from inception. US-based interests continue to receive substantial investment, capturing 34.9% of funding. Recent examples highlight this trend. Jerry AI, an AI-powered car insurance provider, secured $110 million in a Series C2 round through new investments and debt equity. Mosaic, a next-gen specialty insurer, obtained additional growth capital, leveraging their sharp focus on targeted offerings and technology. Converge Insurance, a cyber risk management pioneer, closed a successful $15 million Series A funding round. This investment trend underscores the value of clear value propositions and domain expertise in the insurance sector. Startups addressing specific pain points are better positioned for funding and long-term success. As insurtech evolves, a renewed focus on targeted solutions will usher in a promising new phase of maturity.

 [2]

Q2 Insurer Earnings Continue: No Surprises

Once again, the past week brought forth a slew of insurer earnings reports, and the recurring theme remains consistent – no major surprises, but the pursuit of profitability takes center stage. CNA, Axis Capital, and American Financial stood out by reporting significantly higher net income figures, buoyed by robust investment income despite grappling with substantial catastrophe losses that affected the industry at large.  Allstate and Progressive offered deeper insights into their recent warnings of substantial losses, revealing strategic plans to boost profitability and carefully manage risk exposure. Meanwhile, Root showcased encouraging signs of progress as they narrowed their losses wiith CEO Alex Timm emphasizing a careful balance between growth and profitability.  However, they continue to face headwinds and the looming risk of running out of cash – a notion that seemed far-fetched during the height of their valuation days.  Similarly, Lemonade experienced a narrowed loss, but an increase in expenses and an elevated loss ratio raised concerns.   AXA and Swiss Re reported healthy surges in Gross Written Premium (GWP) and net income, further complemented by robust combined ratios, indicating their strong financial positions.  Prudential’s CEO declared a significant milestone in the company’s effort to de-risk its book of business and reduce market sensitivity, highlighting their commitment to prudent risk management. He also revealed the company’s continued openness to future reinsurance deals as part of their strategic approach.

 [3]

Ongoing Fallout from Vesttoo Fraud

The aftermath of the Vesttoo fraud scandal continues to unfold, with further troubling developments coming to light this week. Aon, who served as an intermediary in several transactions, is now facing legal action as a consequence. The impact on Vesttoo itself has been severe, with the company forced to take drastic measures, including laying off a staggering 75% of its workforce and shuttering multiple offices.   Disconcerting details about Vesttoo lack of regular reporting to the board of directors and deliberate concealment of unfolding events in the weeks leading up to the scandal’s public revelation let to the departure of the co-founders.  The insurance industry remains vigilant as the situation unfolds, closely monitoring the extent of its ramifications and seeking safeguards against potential future damage. As stakeholders reflect on this unsettling chapter, the emphasis shifts toward fostering transparency, accountability, and a renewed commitment to ensuring the integrity and trustworthiness of all players in the industry.

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