Insurance Tech Benefits Landlords and Tenants in our Backing of TheGuarantors

Related companies
TheGuarantors
Thesis
Author
White Star Capital
Date
18th October 2016
The Guarantors logo

Insurance Tech as a sector has seen a surge in funding of 42% YoY in H1 2016 compared to the same period in 2015 with more than 80 deals topping $1B in funding. The market is however still young and we are seeing a lot of room for technological disruption. 62% of the deals in H1 2016 are at the Seed and Series A level, with 63% of the deals coming from the U.S. (source)

One of the subsectors of Insurance Tech that is least discussed but that represents a large market is insurance on rental payments. To avoid ambiguity, we are not talking about renters’ insurance; rather we are discussing insurance on the monthly payments of rent paid by the renter to the landlord. In terms of market sizing, it is estimated that $94B in rent is paid per year in New York City alone with a total of 2.2 million rentals in 2014 (~15% of U.S. apartment rental market), and another $518B rent across the rest of the country. In fact, the renter fraction in the US is 36.9%. The insurance opportunity is rooted in the default rate on these leases: 6% to 35% of these rental leases, depending on the tenants’ profiles, are defaulted.

We therefore see a massive opportunity for technology to help insure these rental leases and we are delighted to announce our investment in TheGuarantors, led by Julien Bonneville.

Evolving in an environment which is seeing a lot of potential growth, TheGuarantors’ solution meets the needs of landlords and building property managers, brokers and prospective tenants by offering renters to be their guarantor for a fee. The company helps landlords and renters to connect, and secure the rent payment over the duration of the lease.

Prospective tenants who most benefit from TheGuarantors include students, recent grads, internationals of all ages & wealth levels, retirees and self-employed individuals. These tenants have every intention to pay their rent every month but, after hunting and finally finding their dream apartment, they are told by the landlord that they need a guarantor to be approved for the apartment. TheGuarantors helps the tenant secure the apartment.

In fact, one the team members of White Star could have benefited from TheGuarantors when he moved to the United States several years ago. Because TheGuarantors did not exist and our team member was an international expat working for an international company, to secure the apartment he had to provide a corporate guarantee from his employer (a complicated task not available to most new renters in New York).

The New York skyline

TheGuarantors is especially useful in cities where landlords want to avoid vacancies and where there are high income requirements for prospective tenants to rent apartments. Partners include StuyTown / Peter Cooper Villlage, Moinian Group, Gotham Organization, Silverstein Properties, Eastbridge Group and many others.

In addition to guaranteeing all rent payments at no cost to the landlord, its insurance policy coverage includes industry-firsts such as:

  • Legal fees up to the amount of security deposit

  • Holdovers covered up to two months’ rent

Landlords have access to a dedicated portal in which they manage online claims, track processes and see units covered.

We expect that TheGuarantors’ product will also disrupt the existing market for landlords and renters in other large cities such as Chicago, Washington DC, Boston, San Francisco and many international cities. In any city where prospective tenants need to demonstrate financial metrics to be approved for an apartment, TheGuarantors can make the lives easier for landlords, agents/brokers, and renters.

Julien and team are on a mission to transform the rental market and we are proud to be backing them!

Related companies
TheGuarantors
Thesis
Author
White Star Capital
Date
18th October 2016