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Law360, London (July 21, 2020, 12:45 PM BST ) Bibby Financial Services said Tuesday that its insurance technology subsidiary has stopped writing new business, as trade groups warn of a funding crunch for the start-up sector because of the COVID-19 pandemic.
Coverly, which launched 18 months ago, will no longer process renewals or take on new customers for its insurance for small and midsized enterprises, Bibby said.
The business was part of a wave of small tech-driven brokers and underwriters launched in the last three years, seeking to disrupt traditional insurance models. But the so-called insurtech sector has been hit hard by budget cuts in the past months, and broker Willis Towers Watson warned in May that funding for start-ups fell 54% in the first quarter of the year compared with the previous three months.
BFS, a corporate finance provider, said it will invest in its existing invoice finance and foreign exchange businesses.
"Due to the coronavirus outbreak, BFS has decided to focus investment in its core businesses, where we see greater opportunity to support small and midsized enterprises, during this challenging time," a spokesperson for the company said.
Coverly offered "pay as you go" public liability policies to small businesses. It said on its website that clients with active policies will be covered until their expiry date.
Insurers are struggling with the COVID-19 pandemic: Lloyd's of London has estimated a hit of $203 billion to the global industry.
Trade groups Insurtech UK and Tech Nation released a joint statement this month urging insurers not to cut budgets for innovation as a result of the COVID-19 crisis.
"Innovation in the U.K. insurance sector depends heavily on the leadership of our major insurers," the groups said. "Many of our insurtech firms are SMEs, now facing tremendous challenges as a result of COVID-19 and its impacts on the economy."
Another U.K. insurtech company, Brolly, was bought by Direct Line last week, a deal that will see the business absorbed into the insurer's innovation department.
--Editing b y Ed Harris.
Clarification: This story has been updated to clarify that BFS is investing in its existing businesses.
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