OneDegree, a Hong Kong-based online pet insurer, has raised HK$200 million (US$25.5 million) to support its bid to bring insurance to over 500,000 cats and dogs in the city.

The firm, which was established in 2016 by former JPMorgan banker Alvin Kwock Yin-lun, is part of the first batch of online-only insurers applying for a licence through the fast-track scheme launched by the Insurance Authority in October last year.

OneDegree has raised HK$100 million in its series A funding round, and with its licence application nearing completion, investors have committed an additional HK$100 million once the licence has been granted, a report by the South China Morning Post said.

The Insurance Authority, Hong Kong’s top insurance regulator, requires a minimum capital of HK$10 million for general insurers, but it can raise that floor if the applicant is generating high premiums. In OneDegree’s case, the minimum capital was set at HK$100 million, or 10 times higher.

“When the premium size gets bigger, so does the capital requirement. That is why we got early commitments from investors to give us continual financial support,” Kwock told SCMP.

Kwock did not reveal the entities that have invested in OneDegree, as the regulator has yet to grant the final approval. However, he hinted that these include major insurance and technology investors.

According to Kwock, only 3% of the over 510,000 pet dogs and cats in Hong Kong are insured. This is quite low compared to 30% in Sweden, 20% in the UK, and 10% in Japan. This gives the pet insurance market in Hong Kong lots of room to grow.

“Digital insurance is very popular in overseas markets,” Kwock said. “We believe it will also be popular in Hong Kong because the running costs are lower and customers can buy policies and seek claims much more easily than the traditional way.”