Exclusive: Luzern raises $45M for captive insurance platform

Luzern Risk, which helps businesses form and manage captive insurance companies, has raised $45 million in Series B funding, CEO Gabriel Weiss tells Axios Pro exclusively.

Why it matters: Companies are looking for ways to take greater control of their coverage and risk costs as commercial insurance becomes pricier.

Zoom in: Insight Partners led the round, which included participation from Trust Ventures and existing investor Caffeinated Capital.

Zoom out: Captives are company-owned insurers that let businesses keep some risks instead of passing all of them to commercial carriers.

They write roughly $240 billion in annual premiums, or about 10% of the global property and casualty market, Weiss says.

He estimates that roughly 35,000 U.S. companies have the scale and risk profile to use captives, but says the structures remain concentrated among Fortune 500 companies.

The other side: Caffeinated Capital's Varun Gupta says legacy insurers have little incentive to invest in more modern captive infrastructure because those programs can divert business from their more profitable commercial lines.

How it works: Luzern designs and forms a captive for a client, then coordinates the specialists needed to operate it and manages it once it is funded.

Its platform pulls together captive management, actuarial, legal and tax, regulatory compliance, reinsurance, claims, accounting, investments and advisory.

Weiss says Luzern's software organizes data and extracts information from documents for its team and outside specialists.

Actuaries, regulators and accountants retain their respective review and sign-off roles, and Luzern usually integrates a third-party claims administrator rather than acting as the claims adjuster itself.

State of play: Luzern works directly with captive owners, while brokers and other insurance-channel partners have historically supplied leads.

The company charges an all-inclusive annual management fee based on a captive's size and complexity.

Weiss says a new captive typically takes a couple of months to form, while an existing captive can transition in a couple of weeks.