Specialist venture capital fund Augmentum Fintech (AUGM ) has invested £4m in insurance technology firm Artificial Labs as part of its latest funding round.

The £169m listed fintech fund led an £8m series A-plus funding round into Artificial Labs, which also saw Japanese insurer MS&AD Ventures and venture capital group Force Over Mass Capital invest, alongside other investors.

Artificial Labs is an underwriting technology provider for the London insurance market which partners with global insurers and brokers to ‘facilitate algorithmic placement of commercial and speciality risk’ using its own underwriting platform and contract builder.

The fresh funding round will allow Artificial Labs to ‘accelerate its growth, to continue to build out its product range and further consolidate its position as a leader in algorithmic underwriting software’ as the insurance industry moves towards digital solutions.

The last funding round in 2022 raised £9.5m but Mick Gilligan, head of managed portfolio services at Killik & Co, said the numbers ‘are tiny in comparison to the addressable market’ which sees Lloyd’s of London process more than $91bn of insurance premiums each year.

Tim Levene, chief executive of Augmentum Fintech and manager of the fund, said the insurance market was ‘ripe for further digitisation and the introduction of algorithmic underwriting will improve efficiency for all participants’.

‘Artificial Labs is building an exceptional team and stand out as one of the key disruptors in this space,’ he said.

While Levene is optimistic about the push into digitisation in the insurance world, shares in the fund slipped 2.8%, adding to the 14% fall year-to-date that has seen it languish on a 37.9% discount despite the recovery in tech stocks and the rise of the Magnificent Seven.

Gilligan said the fact Augmentum has remained out of favour is ‘unjustified’ given that it relies heavily on artificial intelligence (AI), which has been hyped in the markets since last year, and a ‘fintech portfolio is an excellent way of getting exposure to the AI wave at an early stage’.

Gilligan said the latest investment is ‘a great example of AI at work in the fintech space’ given its underwriting platform is ‘powered by its domain-specific programming language, created specifically for speciality insurance’ allowing it to explore complex insurance contracts digitally.

Artificial Labs uses cloud-based tools and machine learning to deliver data to insurers and brokers.

He also pointed to Previse, which uses machine learning to allow companies to pay suppliers instantly, and customer onboarding manager for financial institutions FullCircl, as examples of Augmentum portfolio companies that utilise AI.

The persistently large double-digit discount reflects ‘the negative impact of higher discount rates but also a lack of interest in smaller companies, such as Augmentum, that are listed in London’, explained Gilligan.

He said the large discount provides an ‘attractive opportunity’ for investors and for the company, which bought back 3.9m shares at an average price of 99.2p in the six months to end of September.

The shares closed at 96.4p yesterday. Citywire tipped them at 100p in December.