" class="no-js "lang="en-US"> EXCLUSIVE: ‘Risk on the radar’ – Florian Graillot, AstoryaVC in ‘The Insurtech Magazine’
Tuesday, April 23, 2024

EXCLUSIVE: ‘Risk on the radar’ – Florian Graillot, AstoryaVC in ‘The Insurtech Magazine’

Florian Graillot, insurtech influencer, investor and Founder of specialist venture capital fund AstoryaVC believes the sector is a long way from reaching its full potential Florian Graillot, Astorya VC | Fintech Finance

It’s said that if a startup isn’t listed on the Astorya database of European insurtechs, it probably doesn’t exist. Florian Graillot, founding partner of the early-stage insurtech-focussed fund AstoryaVC will take that!

Launched in October 2017, Astorya’s remit, including its Astorya.io automated scouting tool, has been to monitor the local startup industry and help spot emerging trends in that space. Describing itself as the largest search engine for insurance and banking technologies in Europe, Astorya.io has identified more than 3,400 start-ups to date and publishes data including technology description, fundraising, team and founders’ information, business partnerships and whether a startup is active or dead. It looks for embedded and open insurance businesses, those operating alongside the insurance
value chain and, importantly, those taking a punt at new risks.

Astorya.io throws a spotlight on an under-sung member of the fintech family, which, Graillot believes, is a long way off reaching its full potential. Out of a total of just over €12billion in VC backing for European fintech startups during 2020 (according to Crunchbase), Astorya’s monitoring shows just over €600million was targeted at insurtechs – and a big chunk of that (€90million) went to one company, the UK’s Bought By Many. Yet the potential to transform a sector that has lagged banking in the transformation race by some degree is huge. The apparent lack of investor activity is a source of disappointment for Graillot.

“In Europe, the insurance market is worth around $1,300billion of premium – having even one per cent of that, you’re already a huge company,” he says. “So, it should be a more attractive market.”

One reason it isn’t, he thinks, is that there’s no obvious insurance cluster on which to focus attention. There is no equivalent for insurtech of the London fintech ecosystem, for instance. Rather, there are several ‘hubs’ each only comprising a handful of operators who share a city or country purely by accident of birth.

“Take Germany. There is Munich, with Allianz and Munich Re, and Cologne, with Köln and mutual Tier 2 players. In France, it’s the same; you have a few big players in Paris; most of the mutuals are in Lyon. So there is no one hub with all the players that could maybe drive innovation in that space,” says Graillot. Neither has there been the hunger to create one – at least, not by the major institutions, who, until now, have not felt the same imperative as banks to find new revenue streams. Now that open banking has released the first open finance innovators from the stalls, though, that could change rapidly as providers seek to embed insurance services in their own offer.

In January, UK challenger Revolut teamed up with Chubb to broaden the range of insurance available through the bank’s developing ‘super app’, having partnered with insurtech platform Qover to provide embedded insurance for all its account holders the previous month. German neobank N26 announced a partnership with Simplesurance in May, beginning with coverage for customers’ smartphones, which can be purchased, managed and for which claims can be initiated within the N26 app. Austria’s Raiffeisen Bank recently partnered with bancassurance platform Bsurance to offer usage-based accident cover for customers on their way to the ski runs, giving them the ability to pay from their bank account through the Bluecode app.

Graillot watches the growing enthusiasm for embedded insurance closely. But, as an investor, what really excites him is genuine product innovation, something legacy providers, who dominate with often mandatory, commoditised products, are, by and large, not interested in developing themselves, he says. It’s what led AstoryaVC to back Sesame IT, a French deep-tech cybersecurity startup, which ensures the detection of cyberattacks on critical networks, and Wetterheld, said to be the first company in Europe offering easy-to-purchase, personalised weather insurance for farmers and others.

“Innovation is one strong pillar in our investment thesis,” says Graillot. “Competition among these kinds of products is limited, but the challenge then is to have a market big enough to make money out of them, and be able to build a strong company… that’s the first issue. The second is that there is no historical data on which to base the risk analysis – 13 years ago, for instance, Bitcoin didn’t exist. Insurance companies don’t have the data around cryptocurrency, which means they don’t have a competitive edge in that market. And when it comes to accessing external data, new datasets, and gathering them together in one place, startups are more agile than corporates. The last point is that all this requires a lot of technology. Attracting tech talent is more difficult for a corporate than for a startup.

“For those three reasons, we think that new risk is very exciting, hence our investment in this space.”

Of all the opportunities that currently have his investor antennae wagging, insuring cryptocurrency losses is the most intriguing and potentially one of the most valuable, says Graillot. Losses to fraud in this space are becoming endemic and progressively bigger. Indeed, the Chainalysis 2021 Crypto Crime Report noted for example that a cybercriminal syndicate called the Lazarus Group is believed to have stolen more than $1.75billion worth of cryptocurrency in the time it has been active. Most recently, it was reported to have pulled off the biggest heist in the short history of cryptocurrency, transferring the equivalent of $281million (at the time) from the Australian KuCoin exchange in 2020. Although no investor lost out on this occasion as the majority of the funds were recovered and the remainder reimbursed by KuCoin under its own business insurance, for the vast majority of ordinary traders there is no protection if their wallet is hacked.

Only two products have emerged within the last year, even as the pandemic fuelled another crypto stampede: Coincover Theft Cover, created by Lloyd’s syndicate Atrium in conjunction with Coincover, to protect against a broad scenario of risks, including hacking; and a crypto-denominated cyber insurance policy placed by Boston-based insurtech startup Breach with CoinList.

Coincover was set up in 2018 to establish an industry safety standard for cryptocurrency, which demonstrates an organisation has a superior level of compliance and business recovery arrangements in place. Its Theft Cover policy will be available to investors dealing with crypto firms using the Protected By Coincover mark. The policy incorporates a dynamic limit that increases/decreases in line with the price changes of the crypto assets, meaning the insured will always be indemnified for the underlying value of their token, even if this fluctuates over the policy period. It is backed by a panel of Lloyd’s insurers, including TMK and Markel.

The CoinList cover was made possible through a partnership between Breach and UK insurtech Nayms, a platform that allows cryptocurrency investors to reinsure crypto risk through insurance smart contracts. That cover is now available is a welcome development, given the potential for personal losses. But as crypto goes mainstream, becoming part of the business model for many ordinary companies, with financial institutions increasingly seeing the usefulness of cryptocurrency as a regular asset, Graillot argues there’s a prima fascia case for more insurtechs with deep data capabilities to help mitigate the risks.

“Most of the companies we see in blockchain, crypto, DeFi, and so on, are to do with pure banking,” he says. “While these crypto insurance markets are at the moment still very limited, compared to others, the more value you have in that ecosystem, the more there is a need for insurance. Based on the market cap of these cryptocurrencies, and the poor regulation around them, I think this is a huge opportunity.”


 

This article was published in The Insurtech Magazine #06, Page 49-50

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