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The US-based insurtech, which recently expanded to Canada, has secured $90 million in a Series C funding round led by Valor Equity Partners, which included participation from Greyhound Capital, among others, per Crowdfund Insider.
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Coalition offers cyber insurance coverage in addition to a cybersecurity platform, which is free for insurance clients and helps them manage and mitigate their cybersecurity risk using the insurtech’s cyber tools. Coalition provides comprehensive cyber insurance coverage of up to $15 million and is aimed at small- and medium-sized businesses (SMBs). It has grown its customer base to 25,000, which marks a 600% increase in the last year. The insurtech indicated that the fresh funds will be used to finance the recent Canada expansion and to roll out new insurance products within the cybersecurity space.
The funding comes as cybersecurity becomes a larger, global threat to businesses of all sizes. The average annual cost of a data breach per company in select markets is $3.9 million — a 9% increase from 2017, according to an IBM report. The remote working enforced by the pandemic has only increased online activity and heightened cyber-related risks, such as phishing attacks: The number of coronavirus-related phishing attacks has increased exponentially at a rate of 667% between February and March 2020, according to Barracuda Sentinel data.
On a similar note, cyber insurance is a small, yet growing market: Property & Casualty cyber insurance Direct Written Premiums (DWP) grew 12% between 2018-2019, in line with the prominence of the threat to businesses. The combination of the serious threat of cybersecurity along with the growth of cyber insurance likely played a part in Coalition achieving this funding.
We think Coalition will fare well long term, as it will appeal to SMBs that are underprepared and underinsured against cyber attacks. SMBs reported average financial losses of more than $2.5 million from data breaches in 2019, per IBM — and given that businesses of this size take in revenue of $50 million or less, on average, cybersecurity costs have the potential to put them out of business. Despite this, 23% of SMBs in the US and UK have no endpoint security, likely due to the cost of using paid cybersecurity solutions, and only 35% of US small businesses have cyber insurance coverage.
Thus, we think Coalition is well placed to continue to grow long term by helping to fill this coverage gap, and its dual offering likely makes its solutions particularly attractive to SMBs: By offering cybersecurity tools for free, as an add-on to the cost of cyber insurance coverage, it makes both the managing and mitigation of cybersecurity and cyber insurance coverage more financially viable.
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