Vesttoo eyes rise in demand driven by capacity crunch amid hardening

Anthony Southern joined the company, which was recently valued at $1 billion at its latest Series C funding of $80 million, from another insurtech Instanda where he was managing director, EMEA P&C. Before that, he spent some five years at Arch Reinsurance. He has also worked for Advent Underwriting, Canopius and Hiscox.

Southern said that many parts of the market remain uncertain at the moment and there are areas where capital is in short supply. This has led to increasing interest in its products.

“From our insurer clients we are seeing continuous high demand for quota share as well as aggregate stop loss transactions in the non-catastrophe space,” he said. “The hardening reinsurance market has been exacerbated post Hurricane Ian, and Vesttoo is able to connect new capacity to the insurance market when it has become harder to find.

“On the buy side we are seeing a reaction to inflation, rising interest rates and market volatility - investors are looking to hedge with investment opportunities that are uncorrelated to market trends and offer diversification benefits. Investors are also increasingly interested in the low volatility returns offered by predictable non-volatile focused insurance opportunities.

“The market remains in a place of flux and there are areas of capital constraint. The market is having to adjust models to ever changing circumstances, e.g. global inflation, geo/political instability, climate change, war, social inflation and recession. That is a powerful mix. This in our view puts a further focus on modeling, data and analytical capabilities in a challenged pricing environment.”

But he stressed that the landscape is also evolving. While there are clear “pockets of hard market” such as cyber limits and some longer tail liability classes such as E&O, other areas remain soft. He also points to complex and demanding pricing environment whereby factors such as climate change, war and inflation must be factored in. “It is critical capital providers are ensuring these factors are adequately and transparently risk priced in the asset class,” he said.

His specific role at Vesttoo will consist primarily of building awareness of the company’s brand and deploying its proposition amongst brokers and their clients. He stresses that Vesttoo excels at turning around rapid pricing reinsurance indications to insurers and brokers for collateralised structures and offering access to collateralised low/no CAT, higher frequency/lower severity portfolios.

“Vesttoo’s machine-learning algorithms are at the heart of its product offering, enabling it to potentially provide a wider range of investors with low volatility insurance-linked investment opportunities which are uncorrelated to financial markets,” Southern said.

“Instead of relying on one model, it operates within a ‘many hypotheses’ framework, running millions of simulations on an insurance portfolio to find the best fits from among hundreds of distinct models, increasing prediction confidence. We are able to model the risk efficiently using our models and offer risk transparency to capital market investors.”

Southern says the $80 million in new capital will be used to further expand its global presence, develop its marketplace platform and widen its offering to insurers and investors. “Our goal is to connect the global insurance markets to the capital markets - and in order to do this, much of this will be an investment in people and expanding the team.

“We are expanding our operations in Asia and the Middle East, where the ILS market is less developed, as well as growing our teams in more established markets in the US, UK and Europe. On the capital markets side, we continue to raise awareness and demonstrate the opportunity of this newer and diversified asset class in the specialty and non-CAT property and casualty space.”