Lemonade, an AI-powered digital insurance company, has signed a business financing agreement with Hannover Re (Ireland) DAC, under which the reinsurer will provide up to $250 million to help fund Lemonade’s sales and marketing spending between January 1, 2027, and December 31, 2028.
Under the terms of this new agreement, the funding is subject to a maximum outstanding capital amount of $150 million during 2027 and $250 million during 2028. At the beginning of each monthly Growth Period, Hannover Re can fund up to 80% of Lemonade’s sales and marketing costs, with a limit of $20 million per Reference Cohort.
Lemonade will then repay the funding over time based on a set percentage of insurance premiums collected from the customer cohorts associated with the funded marketing. The announcement explains that this includes the original funding amount “plus a rate of return in accordance with the Counterparty Cap Amount, defined as the sum of (a) the greater of (i) 0% or (ii) the three-year U.S. Treasury Bill rate, plus (b) 5.8%.”
Once Hannover Re has been fully repaid for a customer cohort, Lemonade retains all future premiums from those customers.
“The Agreement contains standard customary representations, warranties and covenants by the parties, and will continue to be in effect unless terminated by either party pursuant to its terms,” states Lemonade’s filing with the US SEC.
Back in 2023, we reported that the insurer had partnered with General Catalyst, a venture firm and an early investor in Lemonade, to create Synthetic Agents, a financial structure that unlocks growth without depleting cash. This agreement with Hannover Re is essentially an extension of Lemonade’s Synthetic Agents strategy as the firm targets capital-efficient growth.
