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Karn Saroya’s Web3 seed startup is creating a version of Lloyds of London for crypto. It was just valued at $100 million.

Karn Saroya's Web3 seed startup is creating a version of Lloyds of London for crypto. It was just valued at $100 million.

  • The Web3 reinsurance company Re has raised $14 million from investors such as Tribe Capital.
  • Re is building a “decentralized Lloyds of London” that lets crypto holders invest in insurance.
  • CEO Karn Saroya previously cofounded the Y Combinator-backed insurance-tech company Cover.

Karn Saroya entered the tech world by creating online tools that could easily be used by technophobes: first for online shopping, then for finding insurance.

But a few years ago, he stumbled into what he believes is an even bigger opportunity, in reinsurance, or the business of insuring insurers. Now he’s seeking to apply Web3 tools to make that industry, which is dominated by firms such as Munich Re and Lloyds of London, more accessible.

With his new startup, Re, Saroya aims to build what he calls a “decentralized Lloyds of London,” by allowing crypto holders to invest in insurance policies and offering transparency into the company’s risk management.

Re, which launched earlier this year, has raised a $14 million seed round at a $100 million valuation, Saroya told Insider. The company participated in Tribe Capital’s crypto incubator, Tribe Crypto Labs, and its other investors include Defy, Exor, Stratos, Framework, Morgan Creek Digital, and SiriusPoint.

After working as a consultant for Oliver Wyman, Saroya got his start in tech by cofounding the fashion app Stylekick, which was acquired by Shopify in 2015. The following year, he cofounded the Y Combinator-backed company Cover, which offers car and home insurance through a mobile app.

Cover started out as a search tool for insurance policies but then became an insurer in its own right. Through that business shift, Saroya became acquainted with reinsurance, which insurance companies use to offload some of their direct risk.

Re’s crypto protocol, which is built on the Avalanche blockchain, seeks to enable the underwriting of any sort of real-world risk. The company is starting out with auto and small-business insurance policies, but Saroya envisions expanding to other areas, such as aviation, in the future.

The Web3 element of the business — the public ledger of the blockchain — enables the company to offer real-time transparency into how much capital it holds and which baskets of insurance risk it is taking on, Saroya said.

In addition to Saroya, who is CEO, the company’s founding team includes Natalie Gray, his wife, who leads product and design, and the engineers Cliff White, Ben Aneesh, and Anand Dhillon. Saroya, Gray, Aneesh, and Dhillon previously cofounded Cover. As they shift their attention to Re, they will wind down Cover’s operations and help transfer its policyholders to other insurance companies, Saroya told Insider.

Over the past three months, Re has assessed $300 million in premiums — a quick start, Saroya said, which helped the company secure funding. But of course, it’s still small in comparison to the world’s largest reinsurers: Munich Re, for instance, wrote nearly 16 billion euros in gross premiums in the second quarter of 2022.

Re’s crypto functionality has another benefit, Saroya said. Like other financial products, such as mortgages and loans, insurance policies can be bundled up and sold as securities. But the market for insurance-based securities isn’t easily accessible to most investors. Re is striving to change that by making baskets of policies tradable as crypto tokens. Those tokens can also be invested into other decentralized finance, or DeFi, protocols for additional yield.

As this year’s market turbulence has shown, however, the world of crypto finance can be exceptionally risky. Saroya told Insider that despite Re’s Web3 bona fides, it holds all of its assets in US dollars in order to comply with industry regulations.

In an industry that is slow to adopt change, Saroya said, it’s important that his startup doesn’t veer too far from the norm. That sets Re apart in some respects from other crypto financial institutions that have sought to upend tradition.

“When I’m talking to traditional reinsurance and insurance participants, my objective here to get to scale is to look and feel like any other reinsurance market, the tools that they use, the reporting, the capital requirements,” Saroya said. “All of those things, we conform to.”

 

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Written by Barry Black

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