BMS Re’s Curry: “Data rich” incumbents have an advantage in being able to leverage AI

BMS Re’s Josh Curry has said that insurtechs are currently absorbing the “lessons learned” from the fall-out in the segment in recent years, as he also discussed the advantages of tie-ups between “data rich” strategics and their insurtech counterparts.

Curry joined BMS Re from SiriusPoint last year, where he had been the North America head of distribution, after previously serving in executive roles at other publicly traded insurance companies. He now works within BMS focused on capital markets, M&A, capital raising.

He described the insurtech segment as a “relatively new” asset class that attracted significant investment between 2015 and 2021, while noting that the insurance industry exhibits cyclicality, with capital expanding and contracting driven heavily or in large part by the interest rate environment.

Insurtechs, he said, are absorbing “lessons learned” from a previous boom in investment and valuations, that has since given way to tougher funding conditions leading to both flat rounds and even down rounds in some instances, with insurtechs cutting costs and re-evaluating their business model to maintain runway.

“It's a bit [of a] tougher environment right now, I would say insurtechs are thinking more along the lines of strategic exits in terms of venture-backed or investment-quality insurtech,” he commented.

Investors approaching earlier funding rounds “with more conviction”

To that point, Curry said investors are approaching earlier funding rounds like Series A through C with more conviction, while pre-IPO rounds like Series D and E are potentially less exciting for investors and resulting in fewer “up rounds”.

“[Insurtechs] are really focusing and fine-tuning their business model to make sure that they're cash flow positive,” Curry commented, speaking to The Insurer TV at last month’s InsurTech NY Spring Conference.

The BMS Re executive said that there are a number of specialty MGAs that don’t necessarily label themselves as insurtechs that uniquely leverage technology and have scaled in areas like trucking, the New York contractors market, and the E&S segment more broadly.

“Those companies are trading at very high multiples,” he said, pointing to the appeal of the capital-light and fee heavy nature of MGAs to investors

Curry said tech-founded MGAs exclusively focused on growth and not underwriting results will likely “have a very hard time” finding capacity.

“But if you're a tenured insurance specialist with a great technical co-founder or CTO, [and] you really understand your space that's very niche and specialized, I think capacity is out there,” he commented.

“I think those companies have a very valuable trajectory and meaningful growth pattern given the way the market’s grown over the last five to seven years,” Curry added.

“Data-rich” incumbents benefitting from tech advancements

The BMS Re executive also discussed a possible pickup in strategic interest in insurtechs, following Travelers’ takeover deal for Corvus and Coterie recently attracting investment from Hiscox, among other deals, like the strong ties between Allianz and Coalition.

“Those are very strategic situations that actually build out the capability of the carriers who purchased them or invested,” Curry commented, while discussing Coterie’s work in small commercial and Corvus’ work in cyber.

“Travelers has found that Corvus has the ability to help them build out that capability in a very transformative way and less of a disruptive way,” Curry said, describing cyber as generally being a tough segment to write profitably and to grow at scale.

He also commented on the power of advancing technologies like AI to enable incumbent firms.

“These companies are so data-rich that finding an AI tool that can ingest that data could give a lot of these broader carriers competitive advantages that they have only really envisioned but never really had,” Curry explained.

“And now [they] could use these tools to better understand how [they] can tailor [their] sales force to go out and better engage which brokers, which geographies, which segments of the business should [they] shift your mix to? Is it work comp, or GL or D&O?”

“AI can really help them get there in a way that it can't really influence other companies,” he said of the advantage incumbent firms bring.

Down rounds not “completely unavoidable”

Commenting on insurtech funding conditions, Curry said it doesn’t appear that down rounds “are completely unavoidable” and that investors might like a particular company, but only at a certain valuation.

“It really depends which stage you're investing in,” he said, noting that there are less likely to be down rounds at seed and Series A rounds compared to later rounds.

“[Founders and early investors] are trying their best to manage dilution and to manage down rounds. But in order to stay alive and get to the next evolution of their product, and to get to where they need to be cash flow positive or breakeven, I think flat or down rounds are going to be in continuance for at least the foreseeable future,” he explained.

Curry said BMS Re offers insurtechs and MGAs a roster of “deep tenured” professionals who can help clients “think through” their business model, and aid with capital raising and reinsurance placement.

“My directive and mandate is to really help MGAs, agencies, insurtechs raise money, whether it be growth equity, debt, go to an exit, and really just support them in strategic advisory and building their business,” he explained.

Curry also credited InsurTech NY founders David Gritz and Tony Lew with incubating and building early-stage MGAs, early-stage SaaS companies.

“What I love [about Tony and David] is that they support early-stage founders in the dream.

“And I think that dream is what is going to evolve this insurance industry that we're in and so, the more I [and others] can support them at conferences like this I think the better off the industry is,” he concluded.

Watch the full interview with BMS Re’s Josh Curry to hear more on: