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Friend exists because small-business insurance is priced poorly. Most small companies get sorted into broad buckets and then are charged the average of the bucket. Careful operators quietly overpay and the risky ones get a deal. We build the risk intelligence to tell those two businesses apart. That is the whole company, and it is why our tagline is the plain truth: clarity is the product.
You're getting this note because you're close to Friend, an investor, a client, or a partner. Once a week we pick a few things happening in the insurance world and tell you, in plain language, what they mean and how they shape what we're building. We show our work and our opinions, not just the headlines. If you think we've read something wrong, tell us. We would rather be corrected than sound polished, so reply to this email any time.
In the coming weeks we'll share more details on exactly what we're building, where we are in the process, and what's coming next.
Cheap money and expensive weather turned up in the same seven days.
A three-day Midwest storm may crack the ten costliest on record, while a record pile of outside money keeps lining up behind insurance risk. When big money bets against big losses, the whole game of risk is telling one business from the next.
This week the market lived out both halves of the Friend thesis in the same seven days. Record piles of outside investor money kept lining up behind insurance risk, and a three-day storm across the Midwest may land in the top ten industry losses on record. Cheaper money and pricier weather, arriving together, is the exact perfect storm Friend is built for.
When the prices insurers charge drift down and the losses they pay drift up, the insurer or investor who can tell a careful operator from a careless one is the one still standing. Capital is not the scarce thing anymore. A trustworthy read on which business is the good bet is. That read is what we make.
A three-day storm across the Midwest may crack the ten biggest insured losses on record
Broker Guy Carpenter reported that the severe wind, hail and tornado outbreak that hit the U.S. Midwest 9 to 11 August could produce insured losses above $5.1 billion, high enough to rank in the top ten severe convective storm events ever. Gallagher Re puts total U.S. severe-storm losses for the year already past $35 billion. Severe convective storms, the industry term for the fast-moving storm systems that spin off hail and tornadoes, are now the most expensive category of natural disaster for U.S. insurers.
The prices insurers charge keep drifting down, but the losses they pay out keep drifting up. That is the squeeze small businesses feel first, because they have the least bargaining power when insurers decide to pull back their coverage. Two shops on the same block, one with a maintained roof and a clear parking lot, one without, are treated as the same risk today. Storms like this keep landing. Being able to tell the two apart stops being a nicety. Understanding the difference between operators and their risk profile means staying open for business, or closing the doors for good.
Private-equity giant Thoma Bravo is paying $4 billion to take Accelerant, a curated insurance marketplace, private
Thoma Bravo agreed to acquire Accelerant, a specialty insurance risk exchange that connects vetted underwriting teams with outside capacity, in an all-cash take-private deal valued at more than $4 billion. Accelerant reported that its second-quarter net income jumped six-fold year over year to $80 million, with premium flowing through its exchange up 23%. The deal is one of the largest private-equity commitments to the curated coverholder model to date.
Big money just paid a premium price for the exact structure Friend is building toward: a curated marketplace where somebody (us) does the hard work of sorting the good risks from the bad, while outside money shows up to fairly insure the good ones profitably. That model is now proven at $4 billion of enterprise value. The interesting part for Friend is where Accelerant grew its edge (insuring middle sized businesses, on the underwriting side, on program business) and where the small-business layer underneath is still wide open. That underneath layer is where we hope to help most.
FM, one of the largest commercial insurers in the country, bought a wildfire firm that scores buildings one at a time
FM acquired FortressFire, a company that uses physics-based fire modeling and machine learning to score wildfire risk building by building rather than by zip code or blanket zone. FM plans to fold the technology into its own underwriting to move wildfire coverage away from the current blunt approach (draw a red line around a region and exclude everything inside) toward a per-property view. More than 20 states already accept AI-driven wildfire models in insurer rate filings.
This is our whole worldview, applied to fire. The insurance industry has been treating whole regions like one risk, and it turns out two houses next to each other are not the same house. FM is now paying to see the actual building. The next obvious step is to understand the actual business operating inside it. That is Friend. Two restaurants on the same block are not the same restaurant. Different operations. Different risk profiles. Paying attention to the differences is worth real money to whoever bothers to look.
Insuring the buildings that run AI is on its way to a $24 billion market by 2030
Allianz Commercial projects that global insurance premiums tied to data centers, the specialized buildings full of computer servers that run the internet and, increasingly, artificial intelligence, will grow from about $11 billion today to more than $24 billion by 2030. New builds are colliding with familiar problems: fires from lithium-ion battery backups, water damage from cooling systems, and construction defects, all sitting inside single buildings worth hundreds of millions of dollars.
Data centers are the newest cross-section on the block, and the market is already noticing that the risk lives inside the specific building, not on the map. The larger point for Friend: every new category the industry names first (data centers today, autonomous agents next) starts out being priced by rough averages, and the operator who runs a spotless facility ends up paying for the sloppy neighbor down the road. That gap is where we live, at every size, and it is only going to get bigger.
Capital is abundant and calm weather is not. A reckoning is coming between investors seeking yield and an unsympathetic climate: the scarce thing of true value is a trustworthy read on which business is actually the good bet.
Friend is building the risk-intelligence layer for small-business insurance. If you want the full plan, or you just want to learn more, we would love to talk. Request it at newcombe@friendanalytico.com, or just reply to this note. Whether you're thinking about investing or only want to learn more, either is welcome.