Federato, an AI-powered underwriting platform for the insurance industry, has secured $80 million in total funding, which includes its latest Series C round.
The $40 million round was spearheaded by StepStone Group (NASDAQ: STEP), a global private markets investor, with backing from existing investors Emergence Capital, Caffeinated Capital, and Pear VC.
These investors together oversee more than $200 billion in assets under management.
John Avirett, Partner at StepStone Group, commented: “We have been closely following Federato’s rapid growth over the past five years as an LP in several organisations who have been investors in the company since inception.
“Founders Will and William’s deep expertise in AI and their dedication to bringing a true vertical AI product to the insurance industry is impressive. Federato’s fast-growing customer base is a testament to the impact they’ve already delivered.
“We are excited to partner with Federato as they help insurers innovate on business models to better serve challenged markets.”
Federato’s RiskOps platform ushers in a new era of underwriting for the insurance industry. Over the past decade, insurers have faced increasing challenges such as climate change, cybercrime, and social inflation, and AI is expected to play a pivotal role in determining future industry leaders.
RiskOps fosters an AI-driven approach that enhances risk selection, making it faster and more accurate, while improving team efficiency and supporting profitable, sustainable growth.
Federato’s clients typically experience a 90% reduction in time-to-quote, a threefold increase in the proportion of quality business bound, and a 50-90% decrease in the number of systems used by underwriters. These advancements are crucial for tackling emerging challenges while maintaining efficiency and competitiveness.
“When we started with Federato nearly three years ago, we were impressed by the modern underwriting platform they had built. Since then, Federato has become the core engine that powers our growth businesses here in North America. Today, we are leveraging the RiskOps platform as a unified core system for the entire policy lifecycle, from submission to quote, bind, and issue,” added Mike Foley, Chief Underwriting Officer, QBE North America.
As losses in the insurance industry have become more volatile and unpredictable, the volume of data insurers must manage has outpaced their ability to organise and utilise it effectively.
This challenge has caused many large insurers to retreat from difficult markets, citing a lack of technical capability to properly price risk.
Federato’s AI-driven RiskOps approach has proven especially valuable in helping insurers navigate complex markets such as aviation, commercial trucking, political violence, wildfires, and hurricanes, while also delivering significant efficiencies in more traditional sectors.
“Velocity is and always has been in the relentless pursuit of a more efficient operation that can serve the challenged coastal wind-exposed property market,” said Rod Harden, President, Velocity Risk, an MGA/carrier hybrid specialising in E&S property insurance.
“In order to do that, we need an underwriting platform that can keep up with the complexity and speed of our business. Federato has delivered on those needs and pushed us to constantly iterate and improve on our processes, driving a 3.7x increase in the percentage of our bound policies that meet our definition of high appetite.”
Federato currently supports thousands of underwriters in focusing on the most valuable business across global carriers, MGAs, and mutuals. This new funding will enable Federato to expand its global presence further, targeting growth in the UK, Europe, LATAM, and APAC markets.
Will Ross, co-founder and CEO of Federato, stated: “We couldn’t be more elated that our investors and customers feel the momentum of RiskOps in insurance the way we do. We see this financing as a milestone of continued progress and not an achievement in and of itself. That achievement lies in the value we are creating each and every day for our customers and the communities they serve. Onward!”
