Element, once hailed as a promising player in the German insurtech sector, has declared insolvency following restrictions imposed by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). The decision to halt the sale of new policies proved financially debilitating, leading the company to file for bankruptcy. This situation casts doubt on the future of innovative insurance offerings within the industry.
The progressive insurtech had built its reputation on developing cutting-edge insurance products for major partners such as Volkswagen and Borussia Dortmund. Despite raising substantial capital of €150 million, Element struggled to maintain financial stability, exacerbated by BaFin's recent interventions.
According to reports, BaFin had placed the bolts on Element's operations back in December 2024, leading to the official insolvency filing shortly thereafter. The court sanctioned a preliminary insolvency procedure, with Friedemann Schade from the BRL law firm appointed as the provisional insolvency administrator. Existing customers now face uncertainty, as the firm has suspended all damage payouts, placing them at risk.
A pivotal moment for Element came when major reinsurer Hannover Rück pulled out of its support late last year. This withdrawal prompted BaFin to demand additional capital, which Element failed to secure. With investors reluctant to contribute more funds, particularly those recovering from significant previous write-downs, the company finds itself trapped.
This insolvency highlights the precarious nature of the insurtech field, particularly for German enterprises. The event is part of a broader wave of struggles within the insurtech space, where even market leader Wefox reported a staggering 90% valuation drop recently, prompting its management to seek new leadership to stabilize operations.
The future of Element hinges on finding interested buyers for its existing insurance portfolio—a possibility which could open avenues for other insurance firms to expand their market dominance. Industry experts and competitors are observing these developments closely, eager to decipher the potential lessons stemming from Element's downturn.
Meanwhile, the BaFin's intervention has heightened concerns among customers holding policies with Element. A report from the Bund der Versicherten (BdV) cautions all clients to review their insurance contracts, especially those with new damages since payouts are currently unguaranteed. The BdV emphasizes the urgency of securing new coverage with alternative providers to avoid lapses.
At the time of its insolvency filing, Element reportedly served around 400,000 customers across various insurance types, including niche coverages such as bike, accident, household, vehicle repair, pet, and smartphone insurance. It is imperative for clients to ascertain whether they have insurance directly through Element or via its partners—many of whom may not present the Element name as the primary insurer.
These partners entail well-known entities like Auto Protect and Die Bayerische, where Element operated as the risk bearer. Experts urge policyholders to prioritize finding new coverage, especially for fundamental contracts like liability and homeowners insurance. They recommend seeking provisional coverage agreements to secure protection immediately.
It remains uncertain whether Element's existing policies will be transferred to viable insurance companies or if they will be canceled with the ultimate insolvency hearing projected for February. If the transfer fails, contracts may be terminated without separate cancellation notices.
Insurers and observers alike are left pondering the broader ramifications of Element's bankruptcy. The incident not only showcases the volatility within the insurtech domain but poses pressing questions about the sustainability of novel insurance business models. The lessons from Element's experience will likely shape discussions on risk management, investor confidence, and regulatory practices within this rapidly changing industry.