Bermudian-based Arch Capital Group Ltd has participated in a $12 million seed funding round in support of Rainbow MGA Insurance Agency Inc, a digitally enabled managing general underwriter building tailored small-business insurance products.

Participants also included Caffeinated Capital, Altai Ventures, Zigg Capital, 8VC, Buckley Ventures and Habitat Partners.

Led by an experienced team of repeat entrepreneurs, Rainbow said, it brings a fresh perspective to small-business insurance by launching programmes in specific verticals where Rainbow's approach to data and technology delivers an underwriting advantage.

The company's flagship programme, an admitted business owner's policy product specifically tailored to the restaurant industry, is live in eight US states and expected to be available in more than 25 states in 2024.

Exclusively distributed through independent insurance agents and digital partners, Rainbow said its restaurant programme offers producers a specialised appetite at a time when many name-brand carriers are exiting the restaurant class of business.

"Coming out of the pandemic, we saw a gap in the process of other underwriting companies and carriers focused on small commercial, and this was super clear with restaurants and their ever-evolving nature," said Rainbow's CEO and cofounder, Bobby Touran.

"Restaurants are a massive category where every operator requires insurance, and it has proven to be a challenging class for many capacity providers. We felt that building deep domain expertise in the verticals we focus on would allow us to use technology to tailor our underwriting and prioritise loss ratio, all while maintaining the critically important customer-centric approach to small business."

Rainbow said its engineering team has developed a proprietary and scalable platform for underwriting and transacting every submitted risk.

The company's interwoven approach to utilising data and technology in its underwriting creates differentiated value for both agents and insureds — rewarding policyholders that demonstrate prudent operations, and streamlining placement of accounts for agents, all while ensuring that the company is growing its book with a focus on loss performance.

Rainbow said its vision extends beyond the food service class, with plans to launch specialised programmes in additional business verticals that align with Rainbow's underwriting approach and vision.