We reached out to the leaders of three insurer-backed venture capital funds— Axa Strategic Ventures, American Family Ventures, and XL Innovate—to solicit information on their recent investments and what drove their interest in the insurtech startups. All three funds grew substantially in 2016 in terms of the number and value of their investments.

XL Innovate is a case in point. “We’ve made nine investments to date,” says Tom Hutton, managing director of the VC fund, launched by XL Catlin in April 2015. “We’re focused on early-stage startups, particularly those with innovative approaches to underwriting and client-facing distribution. Change is needed, and we believe the insurtech movement over time produces these changes.”

XL Innovate has a three-pronged investment focus—startups that present the opportunity to grow a new business, provide data analytics solutions, or have developed what Hutton calls “a transformational operating model.”

Axa Strategic Ventures, which is backed by French insurer Axa, has made investments in the “pure insurance space” and in data analytics, says Manish Agarwal, the VC fund’s general partner. While the fund has an open mind when it comes to insurtech opportunities, it’s very selective. “On average, I get about five solicitations a week to invest in an insurtech startup,” says Agarwal. “With so many different parts of the insurance value chain ripe for disruption, there’s a lot out there to choose from.”

He is especially open to the development and emergence of new direct insurance carriers. “There’s a movement among reinsurers to provide capital to companies that build the front-end consumer-facing product, which they can then back with their own balance sheets,” he explains.

Like the other two VC funds, American Family Ventures, funded by American Family Insurance, is focused on early-stage startups from the seed capital phase through the Series B round, where investors take bigger stakes right before the company starts to scale. The fund is focused on insurance innovators in the distribution space; startups involved in Internet of things ventures, such as developers of home automation and autonomous vehicle systems; and predictive data analytics.

“We started with a $50 million allocation from our parent [in 2014], which grew substantially in 2016,” says Dan Reed, the fund’s managing director, who declined to reveal the size of this capital infusion. “I will say that our team has grown from four people to six people, and we’re doing on the order of 10 deals a year, with investments in more than 40 insurtech startups to date,” he adds.

“There’s been a real sea change in the industry with regard to insurtech startups,” says Matthew Wong, senior research analyst at CB Insights. “Insurers and reinsurers see opportunities to achieve a return on their investments in non-insurance-specific startups while getting their noses under the tent.”