As the life insurance industry faces challenges such as implementing IFRS 17 and transitioning from legacy computer systems, venture capital firms believe they can help provide solutions. Portag3 Ventures launched its first investment fund in 2016. A second round of investment enabled it to raise total commitments of $427 million for its second venture fund, Portag3 Ventures II LP.
Insurers including The Co-operators, Green Shield Canada and iA Financial Group, are among the fund’s investors. The fund's objective: to invest in fintechs around the world.
Investing in distribution
Another venture capital firm – Novacap – manages $3.6 billion in assets. Novacap says it is the first private equity firm in Canada to launch a fund dedicated to financial services. On Dec.3, it created a new sector fund called Novacap Financial Services. Its first closing raised initial investments of $260 million. The manager aims to reach $500 million. A second group of institutional investors is expected to be added during the first quarter of 2020, says Novacap.
Specialized insurance and distribution are one of the fund’s main areas of interest. Novacap will also focus on asset and wealth management, alternative lending and financial infrastructure. "The Fund expects to make equity investments to support companies with their organic growth initiatives and drive strategic acquisitions," Novacap says. The fund is backed by private and public pension funds, financial institutions and private investors. "The Financial Services fund addresses a significant need in the Canadian market that we have observed over the past few years." says Novacap president and CEO Pascal Tremblay.
Developments should quickly occur. The first round of financing closing was timely, “as we are currently pursuing some very attractive investment opportunities for the fund," stated Marcel Larochelle, managing partner, financial services, Novacap. The fund seeks to seize opportunities in North America, primarily in Canada.
The implementation of IFRS 17
Such investments will be useful to insurers facing infrastructure and technology challenges, such as the implementation of IFRS 17. This will be a major concern in 2020 – a pivotal year for insurers who must establish comparative data to be ready to implement the international accounting standard for insurance contracts on Jan. 1, 2022.
The Office of the Superintendent of Financial Institutions (OSFI) is consulting on this issue. The OSFI wants to gather information that will allow it to identify or mitigate the problems faced by federally chartered insurers in this implementation.
Two insurtechs stand out in their support to insurers during this undertaking: SAS and Moody's Analytics.
