Insurtech CatX raised a $2.7 mn seed funding for alternative capital platform

CatX, a insurtech platform designed to facilitate the flow of alternative capital into the insurance sector, backed by Y Combinator, has raised a $2.7 mn seed funding round.

CatX aims to bridge the gap between supply and demand in the reinsurance industry, by connecting re/insurers with sources of institutional capital and capacity using its technology platform that features risk modelling and digital placement tools.

Investors of the funding round include top Silicon Valley venture capital firms and angel investors from leading proprietary trading firms and hedge funds.

The funding round marks a key milestone for the company in its mission to bridge the gap between supply and demand in the reinsurance industry.

Earlier this year, CatX was accepted into the startup accelerator programme Y-Combinator, which has helped to build hundreds of successful companies including household names like Airbnb, Instacart, Doordash, Monzo and Dropbox.

CatX was also named by TechCrunch as one of its favorite YC startups following its debut at the accelerator’s demo day in September.

CatX raised a $2.7 mn seed funding for parametric risk exchange platform

The insurance sector is facing a critical challenge due to a shortage in reinsurance capital which is needed to protect insurers from major losses.

This has led to substantial price increases, especially for risks like natural catastrophes and cyber threats. In some cases, this has forced insurers to limit their coverage or completely stop writing business such as hurricane insurance in Florida.

CatX’s innovative solution to this problem is to introduce more alternative capital to the market. They do this by offering high-return investment opportunities to institutional investors and providing them with the tools they need to understand insurance risks.

Benedict Altier, co-founder and CEO of CatX

We help insurers to reduce their cost of capital, brokers to access new sources of capacityand investors to unlock a universe of uncorrelated investment opportunities. We support new and existing ILS investors providing access to a wide range of models and leveraging new technologies such as machine learning and alternative data sets

Benedict Altier, co-founder and CEO of CatX

“By channeling alternative capital into insurance, we’re not only helping to close the growing protection gap but also unlocking a promising new asset class for investors that is uncorrelated to traditional investments like stocks and bonds”, Benedict Altier says.

CatX believes that with its technology, insurers can reduce their cost of capital and investors are able to unlock a universe of high return opportunities uncorrelated with traditional investments.

CatX offers a new model for the modern insurance market by opening access to investors outside of traditional reinsurance players and streamlining transactions with standardised paper and state of the art insights.

CatX will help greatly expand reinsurance transaction volume to create a more liquid risk market to ultimately reduce costs and expand coverage opportunities for consumers across the world.

In an era where the frequency and intensity of catastrophes are on the rise, the need for adequate capital to safeguard against these risks has never been more important.

The company claims to already be working with 15 institutional investors, among which are North American pension funds, hedge funds and structured credit funds.

Lucas Schneider, co-founder and CTO CatX

Between these initial capital providers, CatX says it can offer a way for insurance companies to access “billions in capital” by using its technology platform.

Lucas Schneider, co-founder and CTO CatX

“A key focus for CatX is to make the whole investment process as simple as possible by digitising the workflow and utilising AI tools to shorten contract negotiations”, Lucas Schneider says. “Technological innovation is critical in attracting alternative capital providers that want sophisticated analytics and information tools.”

Citing the issue the insurance and reinsurance industry faces with insurability and what they term a critical shortage in reinsurance capital, CatX says its solution to the problem is to introduce more alternative capital to the market.

The growing concern around the insurance coverage crisis underscores the extent of the problem. In this context, CatX’s successful $2.7 million funding round marks a significant step in its mission to address these challenges.

CatX presents a sustainable, long-term solution to address the challenges of the insurance sector by transforming insurance risk into an investable, tradeable asset class.

Peter Sonner   by Peter Sonner