Cyber insurance and security software provider Coalition raised $250 million in a Series F funding round on a $5 billion valuation, benefiting from the rising cyber insurance awareness and the growing insurance and security convergence trend. 

The announcement follows a $205 million funding round last September. Since then, “the most notable change is the economy — a potential recessionary environment, [and] a lot of challenges around shortages, certainly unemployment,” Coalition Head of Insurance Shawn Ram said, adding that those changes have increased the need for cybersecurity and cyber insurance. 

“Unfortunately, the adversarial community, the hacking community, they don't care,” he added. “Companies may elect to provide less resources toward cyber-related security and controls. The opportunity for adversaries to take advantage of that increases, so what we have seen is an increased demand and increased desire for cybersecurity.”

Plus, during the pandemic, the surging number of ransomware attack victims and its impact also boosted the notoriety of cybersecurity and cyber insurance, Ram pointed out.

“More CIOs, more CISOs have an awareness of how cyber insurance can provide value in terms of having the resources at your disposal and providing you coverage in terms of indemnifying for loss," he added. “Unfortunately, cyber claims causes like ransomware incidents, vulnerabilities, hacking-related activity increases awareness of cyber insurance."

On the other side, the influx of ransomware attacks also challenges the insurance industry. Major insurers have suffered losses from ransomware attacks. At the same time, the industry struggles with higher insurance payouts to policyholders hit by ransomware and grapple with how to handle this growing risk.

For Coalition, ransomware is the third-largest claim vector and most expensive claim type. However, while some insurers won’t reimburse ransomware payments for new policyholders, Coalition hasn’t reduced coverage, Ram noted.

That’s because the active insurance model permits the company to have a more stable insurance environment, which results in its policyholders experiencing 70% fewer claims than the industry average in 2021, compared to the latest available National Association of Insurance Commissioners (NAIC) report, according to Ram and Coalition. 

Coalition’s model includes a cyberrisk management platform that includes risk assessment, automated security alerts, credential monitoring, endpoint detection and response, threat intelligence, security awareness training, patch management, distributed denial of service mitigation, penetration testing, and an incident response team, alongside its insurance. The company resolved 46% of claims at no additional cost to the policyholder using its in-house claims and incident response teams last year, Coalition claims.

“We believe that providing insurance in a robust manner coupled with sophisticated cybersecurity tools and monitoring is really the best way to attack cyber-related risks,” Ram said.

Additionally, Coalition primarily works with small- and medium-sized businesses with limited resources or without their own security teams to fight cyberattacks.

“I believe that the need to bring cybersecurity expertise in order to underwrite and understand, assess, and analyze cyber-related risks is critical,” he concluded. “And I think that insurance companies who don't go that route will be challenged by claim activity.”