Cerchia raises seed funding for its capital markets direct risk transfer platform

Swiss-headquartered fintech startup Cerchia has raised CHF 1.3 million in seed funding from High-Tech Gründerfonds (HTGF) and other investors, to help finance the ongoing development and first product launch of its capital markets direct risk transfer platform.

Cerchia has created a digital marketplace called DRTTM (Direct Risk Transfer), through which it aims to enable efficient risk transfer between insureds, be they corporates, insurance, or reinsurance firms, and capital market investors.

Cerchia’s direct risk transfer platform (DRTTM) has been developed on a blockchain platform, but transactions can be entered into both on and off-chain, depending on the needs of a risk transfer buyer.

The company is aiming to launch a first product this spring 2023, that it believes will enable efficient, transparent and compliant risk transfer, between reinsurers and investors.

Seeing a need to facilitate more efficient risk transfer in order to narrow the global insurance protection gap, Cerchia hopes the end result will be a platform for hedging climate risks that can deliver uncorrelated return opportunities to capital market investors at the same time.

Michael Rey, CEO, and co-founder of Cerchia commented on the seed capital raise, “I am very pleased with our investors’ confidence in our mission. The investment will help us grow the team and invest in technical advancements to provide a comprehensive, direct risk transfer experience to our global clients.”

Dominik Lohle, Senior Investment Manager at HTGF, also said, “Investing in companies that address problems caused by climate change is not only a social concern, but also shows a lot of potential. Cerchia has found a unique and innovative solution to address the problem of growing climate risks with unprecedented efficiency using distributed ledger technology. We are excited to launch the solution to market with Cerchia.”

Dr. Fabian Bachmann, COO, and co-founder of Cerchia, added, “With HTGF and other investors as partners at our side, we have reached an important milestone. As of now we start to launch a number of new products and invest in our DRTTM platform to create an efficient, transparent and compliant capital market solution.”

Cerchia sees its platform being used to directly transfer risks related to catastrophic perils such as storms and earthquakes, as well as other climate linked perils such as flooding, plus pandemic or pollution risks.

The company looks set to have a parametric risk transfer focus, while leveraging smart contract technology to facilitate the direct transfer of event risk from insured party to investors.

Cerchia has insurance-linked securities (ILS) experience within its team, counting former Twelve Capital founding partner Sandro Kriesch and former Plenum Investments director Erwin Zimmermann as advisor and board member.

Cerchia follows on the heels of a number of other startups that sought to leverage smart contract technology within the reinsurance and insurance-linked securities (ILS) sectors. So far, blockchain implementations have proven complex and costly, while forcing users to try and get to grips with a far deeper level of technology than they should be exposed to.

Blockchain has uses that can be relevant in risk transfer markets. But, in order to gain traction, blockchain technology needs to be abstracted away, so as to enable users to interact with these platforms without requiring an understanding of the tech itself, or having to invest in specific skills and training just to be able to use it.