Risk-intelligence for small-business insurance
The plumbing for insurance keeps going deeper. Clarity on the risk flowing through it does not.
Every business is a cross-section · Clarity is the product.
Friend exists because small-business insurance is priced poorly. Most small companies get sorted into broad buckets of risk and charged the average premium of the bucket, so the careful operators quietly overpay while the risky ones get a deal. We build the risk intelligence to tell those two businesses apart. A simple score, and what it means. That is the whole company, and it is why the tagline is just the plain truth: clarity is the product.
You are getting this because you are close to Friend, an investor, a client, or a partner. Once a week we pick a few things happening in insurance and tell you, in plain language, what they mean and how they shape what we are building. We show our work and our opinions, not only the headlines. If you think we have read something wrong or didn't explain something clearly, please reply and tell us. We would rather be corrected than sound polished, and early and often feedback helps us the most. The more brutal the better.
What we are doing building the risk-intelligence layer for small-business insurance: the Green, Yellow, and Red score that tells a careful operator apart from a careless one. In the coming weeks we will share more on exactly what we are building, where we are in the process, and what is next.
The plumbing for insurance keeps going deeper. Clarity on the risk flowing through it does not.
In the same seven days, a record pot of outside money queued up behind the insurance industry, a first fund got built to buy small-business cyber risk, and a new "AI engine" claimed to screen fifty million US-based companies. Yet seemingly nobody spent a dollar on the one thing that would let any of it pay off: knowing which small business is actually the good risk.
This week the industry doubled down on the plumbing of insurance and skipped the read of the risk flowing through it. New capital arriving from every direction. A new AI tool at the underwriters' front desk. Tighter fine print in every policy. All of it useful, none of it a substitute for a trustworthy picture of the specific business standing at the counter, in need of fair coverage. Faster and cheaper is nice. Being right is the whole game, and the small-business risk signal at the end of the pipe still has to actually predict the losses. That is the one hard job that is still unfinished, and it is the one job we are building for.
Gallagher Re reported that alternative reinsurance capital rose 9% in the first half of 2026 to a record $147 billion, taking total reinsurance capital to $688 billion. Catastrophe bond issuance hit almost $18 billion in the same six months, another record, with $65.6 billion outstanding at the end of the second quarter. Notably, the broker added that non-life alternative capital "has increasingly started to penetrate additional lines of business such as casualty."
Alternative capital is a fancy phrase for money from big investors, pension funds, endowments and specialist hedge funds, routed directly into insurance risk instead of investments in the usual insurer balance sheet. A record $147 billion of it is now sitting behind the market, and after years of only chasing hurricanes and earthquakes, it is starting to hunt casualty, which is just lawsuit risk. A customer sues, a policy pays. This is the exact funding thesis behind Friend Insurco: patient, cheap, decorrelated money looking for a portfolio of well-picked small-business property AND casualty risk to sit behind. The catch is that the money stays around as long as the risk picking is good. The understanding of the risk in the book being backed has to be persistent, consistent, more precise than anyone else's, which is precisely what Friend Analytico, our Analytics Company, is built to provide.
London specialty insurer Beazley partnered with Integral ILS, a Bermuda-based manager of more than $3.5 billion in third-party capital, to build a dedicated cyber insurance-linked securities fund platform. Beazley will supply the underwritten cyber risk from its global book; Integral will manage the money. Beazley CEO Adrian Cox described a "vibrant cyber ILS market" as "vital to meet future demand for cyber insurance," with the platform expected to launch late in 2026.
Cyber risk, the cost of hacks, ransomware, breaches, and general online oopsies at companies of any size, have mostly been priced by hand and held on the insurance company's own books and/or passed on through reinsurance. This deal turns a slice of that risk transfer into a fund, meaning a pot of outside investor money buys the risk directly, the way similar funds already buy hurricane risk. Small on its own, big as a signal: when the underwriting is credible, capital markets show up and pay for it. That is the same play Friend is running for small-business risk generally. Build the trustworthy read, and the money follows. Cyber insurance is notoriously tricky to price; it's literally crime online. We look forward to cracking the case soon.
Speaking of Cyber, Insurance Services Office rolled out three new endorsements (CG 40 47, CG 40 48 and CG 35 08) that let carriers cleanly strip generative-AI-related claims out of standard commercial general liability policies. Attorney Alana McMullin told Insurance Journal that "there's been a major shift in the insurance industry's treatment of AI-related risks, and insurers are moving very quickly to limit this exposure." A separate Gallagher study cited in the piece put AI-related lawsuits up 978% from 2021 to 2025, with a 137% jump in the last year alone.
Standard small-business liability policies used to quietly cover the mess when AI made a mistake, a chatbot defamed someone, a tool spat out a copyrighted image, an automated system gave bad advice. Now the industry has three fresh pieces of official policy wording, called exclusions (the fine print that pulls a piece of coverage out of the box), pointed straight at generative AI. Roughly three in four small businesses now use AI in some form. Almost none of them read renewal endorsements to see if their potential AI mischief making is still covered. So a lot of owners just bought less coverage than they had last year and do not know it. Making that kind of hole visible before a claim finds it is exactly what Friend does. Covered correctly, not just covered.
Data firm Carpe launched the Minerva Reasoning Engine, a tool that scores small commercial insurance submissions against more than 200 business characteristics and a database of over 50 million US business profiles, then recommends quote, decline or refer. Carpe says it cuts underwriting touchpoints by up to 25% and saves 30 to 45 minutes per submission. "Carriers need better decisions from the data already available to them," chief executive Max Drucker said.
Small commercial insurance is the corner of the market where the premium is too small to pay a human to really study the risk, so carriers speed-sort businesses into rough buckets and price the bucket. Carpe's pitch is to sort faster and more consistently by reading fifty million public profiles behind the scenes. Faster and neater is nice. It is not the same thing as being right about which specific corner restaurant is actually the safe one. Speed is the easy half of underwriting. A trustworthy read on the individual operator is the hard, unfinished half, and that is the half Friend is building.
Record capital walked through the front door of the insurance store, new tools sped up the front desk, and the fine print on the warranty quietly got longer. Nobody however fixed the one part of the shop that would let any of it pay off, which is telling one small business customer apart from the next.
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. Reach us at newcombe@friendanalytico.com, or simply reply to this note. Whether you are thinking about investing or only want to learn more, either is welcome.