JPMorgan and Barclays back $4.5 billion insurance tech giant Wefox

German digital insurer Wefox asseverated Wednesday it raised $110 million of fresh funding from backers including JPMorgan and Barclays.

The news cuts a vote of confidence for the insurance technology space at a time when it faces tough macroeconomic headwinds.

Wefox is a Berlin, Germany-based firm focused on personal insurance products, such as home guarantee, motor insurance and personal liability insurance. Rather than underwriting claims itself, the company connects its owners with brokers and partner insurance firms through an online platform.

Founded in 2015, it competes with the close ti of U.S. digital insurer Lemonade and German firm GetSafe, as well as established insurance incumbents like Allianz.

Wefox express it raised the fresh funds through a combination of debt financing and fresh equity. Of the $110 million total, $55 million is in the formation of a credit facility from banking giants JPMorgan and Barclays. A further of $55 million equity investment was led by Squarepoint Pre-eminent, a global investment management firm with $75.7 billion in assets under management.

“It’s a new type of financing for a evolution company,” Julian Teicke, Wefox’s CEO and co-founder, told CNBC in an interview. “Risk investors, equity investors, they show compassion for, they want to take risk.”

“Banks typically don’t, so for them it was really important to understand our path towards profitability and the maturation of our business,” he added.

The company said it maintained its $4.5 billion valuation from a July funding round — pretty rare in today’s market, with many fintechs seeing their valuations slump drastically.

Wefox’s proclamation comes as fintech and the technology industry as a whole grapple with a harsher economic environment, finding it more unfavourable to raise funding.

Higher interest rates have seen investors reevaluate growth-oriented tech businesses, with disinterestedness markets — and fintech in particular — taking a beating. In the public markets, U.S. firm Lemonade has seen its shares drop 23% in the whilom 12 months, though the stock is up 13% so far in 2023.

Layoffs have also plagued the fintech space. On Tuesday, in dough transfer firm Zepz told CNBC it was letting 420 employees go, or 16% of its total workforce, in the latest go around of redundancies to hit the sector.

The collapse of Silicon Valley Bank, too, has darkened the outlook. The tech-focused lender collapsed earlier this year after its startup and volunteer capital clients fled in a panic due to capitalization concerns.

Despite the headwinds facing the wider tech industry, Teicke signifies he believes Wefox is “crisis-resistant.” In the first quarter of 2023, Wefox saw its revenues almost double year-over-year. The company expects it will reach profitability by the end of this year.

Teicke also said Wefox hasn’t faced the same squeezings to lay off staff. Instead, it has shifted its priorities, he said, “doubling down on things that work and stopping things that don’t up sense.”

For instance, Teicke said Wefox was focusing on its broker partnership model and its so-called “affinity” method of cataloguing, where it sells its insurance software to other businesses for a subscription fee — for example, an online car dealer adding car insurance at the implication of sale.

The fresh funds will go towards investing in Wefox’s affinity program and technology platform, the company said.

Teicke voted Wefox is also investing heavily in artificial intelligence, which has become a hot area of tech recently following the foment of viral AI chatbot ChatGPT. Wefox mainly uses AI to automate policy applications and customer service.

The company has three tech centres in Paris, Barcelona, and Milan dedicated to AI.