Y Combinator's Corgi Insurance, a $2.6 billion disaster in the making?
Since participating in the Y Combinator Summer 2024 batch, Corgi has had a meteoric rise. The “full-stack insurance platform built for technology companies” has gone from nothing to unicorn status in under 18 months. Selling to fellow Y Combinator companies, Corgi is the insurer for companies that are moving fast and breaking things.
Your LLM’s hallucinations cause damages for your customers? Corgi will insure you1. A bug in your neobank app transfers funds to the wrong recipient? Corgi will insure you2. Accidentally leak your customers private medical records? Corgi will insure you3.
It’s not just the company doing well. The Founders Nico and Emily, who previously ran Basket Entertainment, a Roblox game publisher of games like “Math For Brainrots” and “Roll a Fat Friend”, have been recognised by Forbes 30 under 30. And with the demands they put on themselves and others, it is easy to see how they have achieved so much4.
You can’t demand 7-day weeks while sitting on a yacht. Nico sleeps 3–4 hours a night on a mattress inside the office. If you want your troops to bleed, you have to be in the trenches with them.
— Corgi Insurance is the most intense workplace culture in startups.
The risk in Risk Retention Group stands for risk
As any good Y Combinator startup, Corgi innovated its way to success. Sure, there are other Y Combinator companies that have offered a modern way for startups to buy insurance, like Newfront, but they were brokers, subject to the bureaucracy of the legacy insurance carriers, and only worth a measly $1.3 billion dollars5.
Corgi doesn’t offer insurance as an insurance broker or even as an insurance carrier, instead, Corgi’s innovative insurance product is a Risk Retention Group6. First introduced in the Liability Risk Retention Act (LRRA) of 1986…
A Risk retention group is a member-owned liability insurance company made up of businesses or organizations facing similar risks. Risk retention groups are an alternative to traditional liability insurance, which may not meet those businesses’ particular needs, be too costly, or be difficult to obtain.
Unfortunately, as the name suggests, Risk Retention Groups are not without risk. Unlike traditional insurance carriers that are supported by layer upon layer of reinsurance, regulated underwriting and government insolvency guarantee(s), a single claim against a single member of a Risk Retention Group can leave the group insolvent and cause liquidation, as seen in the 2025 liquidation of CARE Risk Retention Group Inc.
A Vermont Superior Court has approved a state takeover and rehabilitation plan for a medical professional liability insurer for 1,300 physicians that the state says is in hazardous financial condition as a result of a $35.4 million arbitration judgment against it.
— Vermont Takes Over Medical Liability Insurer CARE RRG Facing $35.4M Judgment
Liquidation leaves members of the group in a precarious position, as insurance experts Berkshire Hathaway wrote in 2017.
The effect of liquidation on a policyholder creates a series of problems, distractions and disruptions. Foremost is that existing insurance coverage will, at worst, cease to exist before the policy expiration date or, at best, provide far less financial protection than originally agreed to and purchased. Policyholders will be faced with immediately procuring replacement coverage and the accompanying business disruption. For those policyholders actively engaged in malpractice litigation there will be even more financial uncertainty because they will now be responsible to pay some or all of their defense costs and indemnity payments. Beyond these increased financial obligations, the litigation process will be stayed for an extended period of time, meaning that the lawsuit will remain open for an extended period of time.
— Recent Insolvencies Speak to the Risks of Insuring with an RRG
A Smorgascorg7
Despite the risk, Risk Retention Groups are a very useful structure for liability insurance, with hundreds active in the United States. A typical Risk Retention Group minimizes risk by insuring a narrow type of member. Each member has a clear understanding the focus of the group, and is able to understand the group’s risk.
Every physician in a Risk Retention Group for physicians understands the risk a physician takes in seeing patients. Every trucker in a Risk Retention Group for truckers understands the risk a trucker takes when hauling across the country.
What risk does a technology startup have? According to Corgi8, there’s the risk of algorithmic bias, model performance & hallucination, training data disputes, technology failure, financial Error, user-to-user liability, trust & safety failures, platform performance, clinical workflow risk, PHI & HIPAA security, vendor contract pressure, contractual compliance, investor trust, operational resilience, ransomware / cyber extortion, funds transfer fraud, business interruption, rogue employee carveback, defamation, copyright infringement, invasion of privacy, product disparagement…
Does the CEO of a startup that “automates content marketing” understand the risk taken on by an “AI platform that operates like a world-class compliance expert”? Does the CEO of a startup which provides “AI employees [… and] sells into […] regulated industries” understand the risk of insuring a startup that “builds weather balloons that collect thousands of times more data than legacy solutions”? I’ll let Corgi answer that.
“[A business that builds weather balloons] comes with risk exposure most early-stage startups, especially software companies, never have to think about: hardware deployed all over the world, field operations, and real-world consequences if something goes wrong.”9
As a venture capital funded startup, chasing more and more revenue for bigger and bigger valuations, Corgi has an incentive to onboard as many customers as possible. Every new customer brings new risk to the Risk Retention Group. Corgi offers sales employees base salary up to $300,000 with uncapped commissions on winning new business.
All it takes is one over eager startup to move fast and break a litigious adversary’s back to bring the whole Risk Retention Group down. What’s the current focus on almost every government? A.I. Every government wants to regulate A.I. Every government is under pressure from their citizens to regulate A.I. But if you’re an A.I. startup, don’t worry, Corgi will help you share that risk with a weather balloon startup and a content marketing automation startup.
Blunderwriting
Insurance lives and dies by underwriting. Traditional underwriting involves human beings using their expertise to assess the risk of insuring a customer. Slow and steady, Berkshire Hathaway’s tens-of-thousands strong army of underwriters review document, after document, after document, applying decades of hard won institutional knowledge to profitably insure.
Corgi, on the other hand, have innovated. No army of expensive human underwriters, this full-stack insurance company has broken free from human shackles and embraced artificial intelligence. Corgi will underwrite instantly. Using their hundreds of millions of dollars of investor capital, and the power of technology, they have changed insurance underwriting forever…
…by opening a chain of 24/7 cafes with global ambitions to be led by a Head of Cafe Expansion on $220k/year10, by operating a shuttle bus in San Francisco, by “offer[ing] direct access to disruptive themes and companies shaping the future” through Corgi’s Exchange Traded Funds and most recently assigning their Head Of Operations to lead a team of 12 in building Dataroom, a software-as-a-service document sharing system.
I wonder, are Corgi customers members of a Risk Retention Group that includes Corgi as a member insured against the risk of Corgi’s underwriting letting a high risk member into the group?
What’s their underwriting like in practice?
As the famous adage sort-of goes:
When your
taxi driverreal estate broker is giving youstock tipsinsurance recommendations, it’s time toget out of the marketpick a different insurer.
Maybe there’s a reason it is so difficult to find an insurer insuring against algorithmic bias and model hallucination.
Delving a little deeper
Earlier this year, another 2024 Y Combinator company went through a bit of a rough patch. Delve, an AI powered security audit company, it turns out, were issuing unsound audit reports for other Y Combinator startups. Not long after, under pressure from other Y Combinator companies, Delve were removed from the Y Combinator program.
Just a few months prior, Delve was a Y Combinator darling. Advertisements all over San Francisco. Forbes 30 under 30 for the founders. And then an accusation of copying from another startup hit, and the floodgates opened. Even the Primary Partner at Y Combinator responsible for Delve, Jared Friedman, couldn’t save them.
Fortunately for this story, Corgi is different. Well, sure, there are some similarities, the founders are on the Forbes 30 under 30 list, they were also accused just yesterday of copying another startup11, they’ve innovated with AI in a regulated industry by cutting corners and their Primary Partner is Jared Friedman… but aside from that, they’re different. Corgi has a cafe.
Disclaimer
The author of this post has no direct or indirect involvement with or exposure to any company named. The author of this post wrote every word by hand, no A.I. was used to think or formulate or review. All mistakes are human in origin, no robot to blame.
“Liability for when an LLM provides false, defamatory, or harmful information that causes a third party loss.” Insurance for AI Startups, corgi.insure/ai
“A mistake in payment routing, reporting, or product configuration leads to allegations of customer harm or operational losses.” Fintech Insurance, Professional Liability for the Future of Finance, corgi.insure/fintech
“A stolen device or misconfiguration exposes patient records. You face legal response and third-party demands.” Health-tech Startup Insurance: Protecting Outcomes & Privacy, corgi.insure/health-tech
“Coverage is underwritten by Technology Risk Retention Group, Inc. (TRRG), a risk retention group organized under the Liability Risk Retention Act (15 U.S.C. §3901 et seq.). TRRG is not subject to all of the insurance laws and regulations of your state. State insurance insolvency guaranty funds are not available for policies issued by a risk retention group. Corgi Insurance Services, Inc. is a licensed insurance producer (CA License #6012791) and acts as the program administrator, not the insurer. Coverage is subject to underwriting approval and availability varies by jurisdiction. Not all products are available in all states. Limits, retentions, and terms shown on this page are illustrative and may differ from your actual policy. See our Disclaimers page for full licensing details.”
There is no official name for a group of corgis, but I liked [deleted]’s suggestion. Corglomerate was a close second.
All taken from solutions pages on the website.
From One-Size-Fits-All to Tailored Coverage: Why Sorcerer Chose Corgi for Globally-Deployed Hardware Risk, Sorcerer Customer Story
“Open new cafe locations and drive expansion strategy globally.” Head of Cafe Expansion, $140K - $220K San Francisco, CA, US
“It looks like you didn’t vibe code your data room but stole it from Papermark’s open source and enterprise-licensed code. “ Marc Seitz