2011- Intellectual Property Collateral Insurance
Back in 2008, Alan Greenspan stated “In recent decades … the fraction of the total output of our economy that is essentially conceptual rather than physical has been rising [which has] shifted the emphasis in asset valuation from physical property to intellectual property…”
Mid-cap companies typically borrow funds from asset based lenders who limit the amount of a typical mid-cap loan to a maximum percentage of the borrower’s total assets including the IP assets all of which are pledged as collateral. However the value of the IP is not included in the secured loan LTV calculation thus substantially limiting the loan amount the lender might otherwise be willing to approve. The reason: Banks did not have any assurance (or insurance) guaranteeing the value of the IP Collateral.
An intellectual property evaluation company approached Innovation Insurance Group to solve this problem by creating a first of its kind Intellectual Property Collateral Insurance Policy.
IIG developed the policy form, rates and underwriting guidelines and approach Liberty Mutual Insurance Company to underwrite the program. After months of negotiations, Liberty agreed to provide up to $100 million per lender in coverage guaranteeing the value of the IP collateral as determined by IIG’s client.
Further, Liberty agreed to permit the client for a MGA subsidiary (properly licensed) with limited underwriting authority to be the exclusive distributor of the new product.
Regrettably, due a lack of funding, IIG’s client was not able to sustain the program and it soon closed. There were no losses.
2012- Collectible Authenticity Insurance
The Collectibles and Memorabilia industry is a $250+ Billion dollar per year global market composed of over 3000 categories and sub categories of collectors. It is a big business and by all accounts rampant with fraud. In 1990 a federal prosecutor said that up to 90 percent of sports memorabilia sold in the United States is fake – and the more popular the athlete, the more likely the souvenir is bogus. “The sports-memorabilia business is so bad that it is no longer a question of ‘let the buyer beware,’ but, rather, let the buyer have their head examined,” said Phillip Halpern, an assistant U.S. attorney in San Diego.
In 2012, an entrepreneur, the former owner of Nightly Business Review, set to fix all that. He created a company called Collectors Café with the goal of creating a single web site where only collectibles offered by the top sellers would be available. Moreover, each and every collectible would be guaranteed to be authentic by Lloyds of London. The problem is that the insurance industry had no such product.
Approaching Innovation Insurance Group, IIG developed the first and only Collectible Authenticity Insurance program writing the insurance policy, underwriting guidelines and setting the rates, terms and conditions for coverage. IIG successfully negotiated with the Hiscox syndicate, one of the largest Lloyds of London syndicates in the United States to provide the lead capacity for the program. Today, the program is composed of seven different carriers providing up to $50 million in insurance. There has been no losses.
2014- Bitcoin Theft Insurance
In 2014, the virtual currency began to take off. Led by Bitcoins the desire to put crypto-currency in your portfolio became unstoppable. The problem is that there was no FDIC insurance for this type of “money.”
One of the largest “custodians” of Bitcoins was Bitgo. Bitgo reasoned that if it could provide insurance to its customers in case of loss or theft of their Bitcoins stored and managed by Bitgo, they would have a competitive advantage against the other emerging custodian markets. Unfortunately, “bitcoin theft insurance” didn’t exist and from what Bitgo knew of the insurance industry, they were not confident the industry would be quick to venture into the “wild west” of the new type of “money.”
They approached Innovation Insurance Group. We reasoned that bitcoin theft insurance was just a new combination of old fashion “crime” insurance with “cyber” insurance. Using his knowledge gained from leading underwriting companies in both areas, IIG CEO, Ty Sagalow, approach XL Insurance (now XL/Catlin).
Putting together the policy form, terms, conditions and rates, IIG created “BitSecure” a news insurance policy and created the Bitcoin Insurance Agency, Inc. as a wholly owned subsidiary of Innovation Insurance Group.
After months of negotiation, IIG successfully bound BitSecure with XL. The Wall Street Journal called BitSecure a “watershed” event in the crypto-currency market.
With the value of bitcoins sinking, Bitgo did not renew its policy the following year. During the one year policy period of the policy, there was no losses.
Since the climb in the value of bitcoins, there has been renewed interest in BitSecure.
2016- Lemonade Insurance Company
In May of 2015, two entrepreneurs from Tel Aviv wanted to create a new type of insurance company. Based on cutting edge artificial intelligence and new theories of behavioral economics, this “new type of insurance company” would completely disrupt the current insurance industry.
The problem was that neither of them knew anything about insurance.
So, they needed an insurance expert with decades of experience but one that could think out of the box. They found Ty Sagalow and Innovation Insurance Group.
Backed by the largest seed investment in Israel’s history from VC powerhouse Sequoia Capital (the money behind Apple, Instragram, Paypal, among many others) along with Aleph, Lemonade was born, hoping to prove that when it comes to insurance, when “Life gives you Lemons, You Create Lemonade”, turning insurance from a necessary evil back to a social good.
Taking a new enterprise not associated with any existing insurance carrier from a concept on a white board to an actual licensed and functioning insurance carrier was no easy task. In fact, it had never been done.
As the newly chosen Chief Insurance Officer, Mr. Sagalow had to:
- Staff the company (underwriting, claims, finance, legal etc.)
- Find and execute the proper reinsurance
- Work the CTO (a co-founder) in making sure the technology used for underwriting, claims, back office administration etc worked from multiple perspectives
- Negotiate with insurance regulators all over the country and ultimately obtain licenses to operate throughout the country.
In less than a year, Lemonade was staffed with seasoned insurance professionals, along with the world’s top coders and technology professionals, obtained high quality reinsurance from the some of the best reinsurers in the world, obtained an A rating, and, most importantly, was provided a license to operate in its first state, New York, a state historically known to be among the toughest insurance regulators in the country.
Today, Lemonade is licensed in over 25 states representing 65% of the US market and operates is 8. In 2017, its first full year of operations, Lemonade Insurance company issued over 100,000 policies and captured over 1% of the renter’s market in NY alone.
In March of 2018, Lemonade closed its “C” round with a post money valuation in excess of $500 million. It had been in business 16 months.