#471
Non-Natural Disaster
Published:
Jan 16, 2023
Author:
Sarah Parsons Wolter
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Catastrophe risk. Cyber attacks. As two events rarely received with positive reactions, together they seem even more dangerous. And yet, Insurer Beazley announced this week the launch of a first catastrophe bond for cyber threats (and noted the possibility of additional tranches in coming years). The $45m bond acts like a regular catastrophe bond - which gives investors interest payments until principal is repaid at maturity - except if Beazley receives over $300m of claims from its clients.
Cybersecurity coverage has increased in popularity from private sector enterprises and public sector government organizations alike. The cyber insurance market currently charges $10b in annual premiums, but could reach as much as an estimated $40b in the next few years. Alongside increased demand, prices for cybersecurity coverage has also surged significantly as insurers repriced to compensate for higher claims. As such, catastrophe cybersecurity bonds can help protect insurers from outsized payouts.
Within fintech, cybersecurity is becoming more important, as malicious actors often target high value financial information. As a result, many startups are aiming to help enterprise clients increase cyber defenses through AI, enhanced data analytics, software practices and other means. At the same time, they need to continue to evolve with more advanced attacks on systems and information each day.
In a world where digital finance, the metaverse and Web3 applications proliferate and hold valuable consumer and business data, cybersecurity fintech will likely take on increased roles within IT budgets. Whether in the form of insurance, SaaS, hardware or other, the risk of ransomware attacks and data leakage are simply too large to underinvest in. No nasty surprises, please.
Portfolio News
Berlin-based B2B payments startup Mondu locks in €12m as it expands globally - Congrats to portfolio company Mondu on the announcement of their Series A extension round, led by Valar Ventures and FinTech Collective. The company has now raised over €83.5m in equity and debt financing from leading investors Valar Ventures, Cherry Ventures, the FinTech Collective, and German bank VVRB. The new funding will be used to fuel further market growth and product development. Read more
Vestwell joins forces with Carson Group to launch Carson Complete 401(k) - Vestwell will provide a SMB component to Carson Group’s new Carson Complete 401(k) offering, a program that will allow advisors to seamlessly scale their small and midsize business retirement plan practices. Read more
African payments giant Flutterwave vies to buy British fintech Railsr - Railsr (which was previously known as Railsbank) is in talks with rival suitors including Africa's largest payments technology company about a sale that would take place at a steep discount to an earlier funding round. News of the rival offers for Railsr comes as expectations grow of a wave of consolidation in the fintech sector as companies struggle to access sufficient standalone funding to survive. Read more
Non-Natural Disaster
Insurer Beazley launches first catastrophe bond for cyber threats - Lloyd’s of London insurer Beazley has launched the first cyber catastrophe bond, opening up one of the fastest-growing areas of the underwriting industry to investors as companies and governments seek to shield themselves from ransomware strikes. The $45m private bond will pay out to Beazley if total claims from a cyber attack on its clients exceed $300m — a structure intended to give some protection to the insurer’s balance sheet from “remote probability catastrophe and systemic events”. Read more
Cyber insurance market to generate $48.3b revenue in 2030, says P&S intelligence - As per the recent market research study P&S Intelligence, the cyber insurance market was valued $11.9b in 2022, which is projected to rise at a rate of 19.1% from 2022 to 2030, to touch $48.3b. The growth is ascribed to the rising number of malware, virus, and other kinds of attacks on IT networks, increasing legislation with regard to cybersecurity, and implementation of risk mitigation and insurance strategies across industries. Read more
Cyber attacks set to become ‘uninsurable’, says Zurich chief - Insurance executives have been increasingly vocal in recent years about systemic risks, such as pandemics and climate change, that test the sector’s ability to provide coverage. For the second year in a row, natural catastrophe-related claims are expected to top $100b. But Mario Greco, chief executive at insurer Zurich, told the FT that cyber was the risk to watch. Read more
Industry News
Fidelity makes first acquisition in 7 years, snapping up fintech Shoobx - Fidelity said its purchase of Shoobx is a sign of its commitment to the private market “and will help to satisfy an increasing demand Fidelity sees from private companies to support them as they scale and grow.” Shoobx will be folded into Fidelity’s Stock Plan Services business, which provides equity compensation plan recordkeeping and administration services to nearly 700 companies with 2.5m plan participants, totaling over $250b in plan value. Read more
Judge allows Binance US bid to buy Voyager assets to advance - U.S. Bankruptcy Judge Michael E. Wiles this week allowed Voyager to move forward with an updated asset purchase agreement with Binance.US and to solicit creditor votes on the sale. In doing so, Wiles overruled objections from federal and state regulators that questioned whether Binance was financially stable enough to close the proposed transaction. As part of the proposed deal, Binance.US will pay $20m and take over approximately $1b in assets on behalf of Voyager customers. Read more
JPMorgan bought college financial-aid platform for $175m—and now says most of its users were fake - JPM is suing the leaders of Frank, a financial-aid business it bought for $175m in 2021, alleging they duped the bank by making up millions of fake student accounts to show it had a growing business. Frank CEO Charlie Javice approached the bank in summer 2021 about a potential acquisition, according to the lawsuit. She claimed Frank had 4.25m users, but the company had fewer than 300,000 real users, the suit said, less than 10% of the stated 4.25m figure. Read more
Companies face rising pressure to offer ESG retirement options - Starting on Jan. 30, a Department of Labor rule will take effect that explicitly allows fiduciaries to consider climate change and other environmental, social, and governance (ESG) factors in the selection of corporate-sponsored retirement plans. The rule clarifies Trump-era guidance that left unclear whether climate factors could be considered material risks. Read more
ATM withdrawals rise for first time in 13 years in the UK - Nationwide Building Society has recorded a rise in ATM withdrawals as Brits respond to the cost-of-living crisis by budgeting with physical money. The building society saw 30.2m cash withdrawals made from its ATMs last year, a 19% increase on 2021. However, the number is still well below the 44.6m withdrawals in pre-pandemic 2019. Read more
Jack Ma cedes control of fintech giant Ant Group - Mr. Ma doesn’t hold an executive role at Ant or sit on its board, but is a larger-than-life figure at the company. He has controlled Ant via an entity in which he holds the dominant position. The agreements that allowed Mr. Ma’s dominance will be terminated. He and nine other Ant executives and employees will have voting rights at the company and can exercise their power independently of each other and of Mr. Ma, according to Ant’s statement. Read more
FTX says it has located more than $5b in cash, liquid assets - FTX lawyers also told the judge overseeing the bankruptcy case that the amount of the shortfall in FTX customer funds isn’t yet clear. The company is working on determining the size of the claims pool and potential recoveries for some 9m customer accounts it has identified, FTX lawyer Andrew Dietderich said in the court hearing. Read more
Americans are piling up credit card debt — and it could prove very costly - More Americans are leaning on their credit cards in the face of rising prices. And as interest rates continue to climb, that debt is getting a lot more expensive. The average interest rate on credit card debt has soared to nearly 20%, from just over 16% at the beginning of last year. That's the largest one-year increase in the four decades Bankrate has been tracking rates. Read more
Canada's Nuvei to expand in U.S. with $1.3b Paya buy - For Nuvei, which also listed in the United States in 2021, buying Paya will increase its American business as well as its exposure to payments between companies, a strategy which should make it less susceptible to rapid shifts in macroeconomic conditions and downturns in consumer spending. Read more
Buy with Prime, which brings Prime to third-party sites, officially launches in US on Jan. 31 - The service, which allows third-party merchants to offer Prime benefits like free shipping and returns on their own apps, was initially only available to those merchants who were already using Fulfillment by Amazon (FBA) to handle their shipping and logistics. Read more
More than two-thirds of financial institutions lost over $500K to fraud in 2022 - Alloy released a report finding that 27% of respondents lost over $1M to fraud in the last 12 months. Fintech companies and regional banks were the most likely to report higher losses, as 37% of fintech companies and 31% of regional banks estimated losing between $1-10m to fraud. Read more
Select Financings
40Seas - Israel based cross-border trade financing company raised $11m in Seed funding led by Team8. Read more
Alkimiya - Wilmington based startup building a decentralized capital markets protocol raised $7.2m in new funding led by 1kx and Castle Island Ventures. Read more
Apperio - London based provider of legal spend analytics and matter tracking software raised $7m in new funding led by Molten Ventures. Read more
Butter - San Francisco based accidental payments mitigation startup raised $22m in Series A funding led by Norwest Venture Partners. Read more
Coho AI - Israel based revenue optimization startup for B2B SaaS companies raised $8.5m in Seed funding led by Eight Roads and TechAviv. Read more
CyberX - Massachusetts based market maker for digital assets raised $15m in new funding from Foresight Ventures. Read more
Doorstead - San Francisco based rental property management startup raised $21.5m in Series B funding led by Avanta Ventures. Read more
Paytient - Missouri based health payments startup raised $40.5m in Series B funding led by Mercato Partners Traverse Fund. Read more
Propeller - Philadelphia based insurtech startup raised $6.4m in Seed funding. Read more
Quasar - Madrid based DeFi startup raised $5.4m in new funding led by Shima Capital. Read more
Relio - Switzerland based SME banking startup raised €3m in Seed funding led by TX Ventures. Read more
Superscript - London based insurtech company focused on SMEs and high-growth tech companies raised £45m in Series B funding led by BHL UK. Read more
The Easy Company - San Francisco based social crypto wallet raised $14.2m in Seed funding led by Lobby Capital. Read more
Welcome Homes - New York based luxury homebuilding platform raised $29m in Series A funding led by Era Ventures. Read more
Wunderite - Boston based insurtech startup raised $7.2m in Series A funding led by Spark Capital. Read more
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