ILS manager Fermat invests in cyber insurtech Elpha

Fermat Capital Management, one of the largest specialist investment managers of catastrophe bonds and insurance-linked securities (ILS), has invested in cyber insurtech start-up Elpha Secure Technology, participating in its $20 million Series A.

Elpha calls itself “the first cyber insurance startup to combine proprietary cybersecurity software with coverage to improve risk transfer.”

Canapi Ventures led a $20 million Series A funding round for Elpha, alongside a list of well know insurance and reinsurance investors, one of which being Fermat Capital Management, while the others were Stone Point Ventures, AXIS Capital, State Farm Ventures, The Hartford STAG Ventures, and EOS Venture Partners.

In fact, this isn’t the first time Fermat had invested in this cyber insurance startup, as the ILS manager had also participated in a $9 million seed funding round for Elpha it turns out.

By combining cybersecurity software with risk transfer, Elpha hopes to be able to improve the cyber insurance coverage available, rather than limiting it or raising rates.

Fermat Capital Management is one of the ILS investment managers that has shown strong interest in cyber risk transfer and potentially deploying capital to support it.

The company had signed up to CyberCube’s models recently, to help it better understand cyber accumulation risks.

Elpha’s cyber insurance product is currently backed by AXIS Surplus Insurance Company and Everest Indemnity Insurance Company.

“As a specialist insurer and reinsurer with a leading cyber practice, we at AXIS recognize the dynamism of the digital risk landscape and the importance of risk mitigation against this backdrop,” commented Linda Ventresca, Head of Digital at AXIS Capital. “Elpha Secure’s innovation in monitoring, reducing, and managing risk throughout the life of an insurance policy aims to improve an insured’s risk profile, ultimately delivering better experiences and outcomes for all stakeholders.”

Elpha is a managing general agent (MGA) and as a result, reinsurance capital will be required to support its expansion.

By investing in cyber insurtech startups, of course making an attractive return is possible, but it can also help an asset manager like Fermat gain a deeper understanding of the risk transfer category, while exposing it to leading companies in the cyber insurance and reinsurance space.

“We are humbled by the great investors supporting Elpha Secure and we are thrilled to welcome Canapi as a new partner,”commented Preetam Dutta, CEO of Elpha Secure. “Digital threats are growing in variety, frequency, and intensity, so cyber insurance is becoming indispensable. Yet, smaller businesses are finding they don’t have adequate cyber infrastructure to qualify for insurance. Instead of challenging business owners to define and implement the required cybersecurity measures themselves, we provide these measures through our software as well as the insurance policy. We’re only just getting started, and we look forward to expanding our reach and serving even more businesses in need in the years to come.”

“Today’s small and midsized businesses are not only at a greater risk than ever of suffering a cyberattack, but they also face significant hurdles when it comes to acquiring cyber insurance policies,” added Jeffrey Reitman, Partner at Canapi Ventures. “By embedding security controls directly into their policies, Elpha Secure removes the friction associated with acquiring a cyber insurance policy, while simultaneously controlling loss ratios for their carrier partners. In offering an unprecedented solution that newly combines both cyber protection software and insurance, Elpha Secure greatly reduces the cyber risks in the system for all. We’re so excited to be leading this Series A and look forward to helping fuel the company’s growth into the future.”