Insurtech companies have relied heavily on reinsurers to support their growth, but profitability concerns are beginning to put pressure on these relationships.
Insurtech companies are growing quickly. But growth — including the move to become licensed insurers — comes with greater regulatory scrutiny and capital requirements.
In order to comply, insurtech companies are relying heavily on reinsurance, essentially insurance for insurance companies, by transferring the risk of a high proportion of their premiums to incumbent reinsurers like Munich Re or Swiss Re. With this approach, insurtech companies receive a commission from the reinsurer, can reduce their exposure to claim payments, and reduce the level of capital reserves that they legally need to set aside.