Arbol raises $60m to scale parametrics, make climate risk an investable asset class

Arbol, a technology-led underwriter of parametric risk transfer, climate and weather insurance or reinsurance business, has raised a $60 million Series B round, as it looks to scale parametric insurance in response to what it sees as increasing climate related risks, while also helping to make that risk into an investable asset class.

Arbol has been making rapid progress in its mission to make responsive risk transfer available to those in the way of catastrophe and climate exposures.

The company recently demonstrated its commitment through the launch of Lilypad Insurance as a homeowners specialist carrier, which while a traditional insurance company, is seen by Arbol as a hybrid distribution channel that can help it to grow the total addressable market (TAM) for parametric risk transfer.

Arbol is now making its climate and catastrophe related parametric products available in 15 countries. In 2023 it transacted over $1 billion in notional risk, across deals carrying some $250 million in gross written premium and also launched an MGA in the UK.

The $60 million Series B funding round was co-led by Giant Ventures and Opera Tech Ventures with participation from Mubadala Capital.

With this funding, Arbol aims to continue expanding the addressable market for parametric insurance, reinsurance and risk transfer.

In addition, Arbol says it wants to “pioneer the concept of climate risk as a tangible, investable asset class,” something that is already well-understood in the insurance-linked securities (ILS) market, of course.

Arbol has always had an ambition to leverage capital markets appetite for risk to support its deals, understanding that parametric transactions can be very attractive to investors and that putting a price on climate risk and making that risk transparently transferable, could stimulate the next wave of capital market investor interest in insurance.

Utilising “flexible risk capital”, Arbol wants to make parametric risk transfer ubiquitous and available, taking it far beyond insurance and reinsurance’s traditional product concepts, to deliver something more responsive, reliable and widely understood.

“This Series B funding marks a pivotal moment for Arbol, affirming our achievements and propelling our mission forward to normalize parametric financial products and insurance globally as key strategies in climate risk management,” explained Sid Jha, Arbol’s founder and CEO.

“Our ambition extends from empowering the world’s smallest subsistence farmers in underserved regions to securing the assets of the world’s largest corporations, ensuring they all have access to unmatched protection amidst the unpredictability of climate change. Our approach is not just about offering insurance; it’s about creating a safety net that spans the entire spectrum of economic participants affected by climate volatility,” Jha continued.

Arbol intends to use the funding to continue to expand into risk transfer for agriculture and renewable energy, through products tailored for new perils and geographies.

It will also be used to acclerate Arbol’s global expansion and investment in property and casualty (P&C) and home insurance business lines in the U.S. and internationally, the company said.

In addition, Arbol intends to work increasingly closely with financial sector entities, such as banks, to assist them in understanding, managing and ultimately transferring climate risks, both for their internal risk and their client needs.

“You can’t go a week without reading an article about extreme weather events occurring and the challenge this poses for traditional insurers,” Cameron McLain, Co-founder and Managing Partner of Giant Ventures commented. “Arbol’s pioneering approach enables businesses, large and small, to manage climate risk where traditional insurance fails. Their achievements are hugely impressive, and we believe they’re building an essential pillar of climate adaptation and the global financial infrastructure.”

“While climate change is more and more tangible, the need for hedging solutions that are scalable and economically sustainable is becoming key,” added Thibaut Schlaeppi, Managing Director of Opera Tech Ventures. “Leveraging insurance and capital markets offers Arbol’s clients a pivotal solution to build the financial resilience they need.”

Arbol raised its $7 million Series A back in early 2021, since when it has made significant progress and grown its stature in the market considerably.

A $60 million Series B war-chest, if put to work in the right way, can help to cement its position as a leading parametric market, while also progressing its ambition to make climate risk more transferable and investable.