Hudson Structured Capital Management Ltd., the insurance-linked securities (ILS), reinsurance, insurtech and transportation focused investment manager, has made an investment in a specialist flood underwriting managing general agent called reThought Insurance.
Hudson Structured, doing its reinsurance investment business as HSCM Bermuda, participated in a $15.5 million Series A investment round for reThought Insurance that was led by Telstra Ventures and also saw ArcTern Ventures participating.
reThought aims to fund rapid growth in the flood insurance market for its technology driven approach to underwriting flood exposed property risks in the United States.
Hudson Structured’s Andrew Sagon has taken a seat on the board at reThought, to help in driving growth for the MGA.
The flood insurance market is one that has seen increasing focus and investment in recent years, given the challenges some traditional carriers have faced in underwriting the peril.
There’s a clear need for a technical approach to underwriting flood risks, as well as efficient capital to support it and as an MGA reThought can partner with the best capital or capacity providers, including alternative reinsurance capital presumably, while its software can help it to assess the risk and price it appropriately.
reThought is currently focused on underwriting flood coverage for complex mid-tier commercial risks and high net worth (HNW) properties, but the insurtech MGA is also now creating products for other perils, it said.
The investments it has received will be put to use in funding the continued development of software and data sources, including the reThought’s proprietary model convergence engine and high-definition risk data engine. It will also be used to expand its sales team and add more technical resources, while also improving its operational capabilities to be able to handle increased volumes of business and support faster, continued growth.
“We’re streamlining our operations and our goal is to automate the whole company,” explained reThought CEO Cory Isaacson. “This round of funding will further our ability to provide the best underwriting from the most comprehensive sources of data available for our capacity providers, and ultimately help us meet our goal of closing the gap for US flood in ways that others have not done and cannot do, which puts us in a really unique position in the flood market.”
reThought said that its proprietary model convergence engine allows it to target a broader range of complex risks, including major public transit, underground parking garages and outdoor swimming pools.
Interestingly, the company also writes business interruption insurance and will work around the National Flood Insurance Program’s (NFIP) limit cap of $500,000 by covering up to tens of millions of dollars.
That’s potentially a significant opportunity, as flood related business interruption can cause large and uninsured losses for corporates and is an underserved segment.
It’s also a segment where hybrid insurance products featuring different triggers can create more calibrated and responsive risk transfer solutions, which should be a growth area in years to come.
reThought was founded in 2017 by co-founders CEO Cory Isaacson, Chief Innovation Officer Nicholas Lamparelli, and President of reThought Specialty James Rice, as a response to protecting against flood risk amid climate change.
Given its technology-based approach to creating new products with an initial focus on flood and its desire to expand into new perils as well, the MGA fits with the Hudson Structured insurtech investment thesis, which is often strongly linked to areas of the market where distributing risk capital more efficiently into problem areas of insurance presents opportunities.