Why Insurers Are Abandoning Legacy Systems: Federato Secures $100M Series D from Goldman Sachs

The insurance industry is experiencing a decisive pivot away from traditional core systems toward AI-powered platforms. Federato, an AI-native software company reshaping how insurance operations function, has just closed a $100 million Series D funding round spearheaded by Growth Equity at Goldman Sachs Alternatives. The round demonstrates investor confidence in the company’s mission to modernize an industry long dependent on legacy infrastructure.

The Market Moment: From Legacy to AI-First

Existing insurance platforms have historically bolted AI capabilities onto systems designed for a pre-automation era. According to Jade Mandel, Managing Director at Growth Equity at Goldman Sachs Alternatives, the diligence process revealed something more fundamental: “Federato’s architecture delivers a measurable step change in both ROI and operational efficiency—a marked departure from prior-generation core systems.” This distinction matters because it signals a structural shift rather than incremental improvement.

The insurer community has begun recognizing this gap. Executives interact with AI daily in other contexts and expect equivalent sophistication from enterprise software. When that standard isn’t met by legacy platforms augmented with AI features, the demand for truly integrated, purpose-built solutions intensifies. Will Ross, Co-Founder and CEO of Federato, noted: “Our customers intuitively understand AI’s potential. The frustration arises when they’re forced to work within systems designed decades ago, simply enhanced with new layers rather than reimagined from the ground up.”

Growth Trajectory Validates the Approach

Federato has tripled revenues over the past twelve months, a pace that reflects both new customer acquisition and substantial expansion within existing accounts. This acceleration followed the company’s $40 million Series C round, completed less than a year earlier. The fundraising velocity itself signals market momentum—institutional capital doesn’t move this quickly without clear evidence of demand and execution.

The growth engine behind this performance is grounded in agentic AI, a technology paradigm where autonomous agents conduct sophisticated analysis with minimal human intervention. Federato’s co-founders have been instrumental in advancing this field for over a decade, positioning the company ahead of competitors still integrating bolt-on solutions.

The Policy Lifecycle Problem Solved

Federato positions itself as the only platform spanning the full policy lifecycle—from underwriting through claims to renewals—natively designed around AI capabilities. This comprehensive approach matters because fragmented systems create operational friction and prevent the kind of seamless human-AI collaboration that drives real efficiency gains.

Insurers adopting Federato report a clear workflow transformation. AI systems handle intensive analytical work—risk assessment, pattern recognition, complex underwriting scenarios—with the rigor and consistency that humans struggle to maintain at scale. Human underwriters concentrate on relationship management, nuanced judgment calls, and the contextual decision-making that requires domain expertise and intuition. This division of labor, enabled by native AI architecture, fundamentally improves both speed and quality outcomes.

Michael Waller, VP Technology Business Operations at Mission Insurance, emphasized the practical impact: “Beyond the technological elegance, what impressed us most was the speed to measurable value. Federato’s platform accelerated our transformation timeline significantly compared to traditional implementation cycles.”

Investor Syndicate and Market Signal

The $100 million raise includes participation from returning investors Emergence Capital, Caffeinated Capital, StepStone Group, and Pear VC—an indicator that earlier backers remain convinced of the company’s trajectory and market opportunity. Goldman Sachs’ involvement carries particular weight, signaling that major institutional capital sees insurance software modernization as a significant, investable trend rather than a passing technical upgrade.

With over $180 million raised across all rounds, Federato has the resources to accelerate product innovation and expand geographically. The capital infusion addresses the growing demand from leading insurers worldwide seeking to rebuild their operational foundations around AI-first principles rather than incrementally patch legacy systems.

Elizabeth Johnson, Chief Operating Officer at Ascot, framed the partnership this way: “Our vision requires underwriters who excel at their craft, equipped with tools that seamlessly drive efficiency and superior risk outcomes. Federato’s platform enables exactly that vision—it amplifies human expertise rather than attempting to replace it.”

The insurance industry’s shift toward AI-native platforms reflects a broader recognition: the future belongs to companies built from first principles for a transformed operational reality, not those awkwardly retrofitted to accommodate it.