Early stage insurtech investment reaches second highest figure ever in Q3 2022 – Gallagher Re

Early stage funding for insurtechs in Q3 2022 soared by 48.1% quarter-on-quarter to reach the second highest deal quarter ever – a figure of $545m (£473m).

Gallagher Re’s Q3 Global Insurtech Report, released earlier this month (1 November 2022), revealed that Q1 saw $660m (£573m) in early stage funding, while Q2 saw $368m (£320m).

Average early deal value also increased from $6.1m (£5.3m) in Q2 to $7.5m (£6.5m) in Q3, although this remained down from $10m (£8.7m) in Q1.

Despite a quarter-on-quarter increase of 48.1%, Q3 early stage insurtech funding remained down by 13.5% year-on-year. 

Early stage insurtech deal count also increased from 70 in Q2 to 85 in Q3, according to Gallagher Re’s report. Q1’s deal count sat at 75.

Speaking exclusively to Insurance Times, Andrew Johnston, report editor and global head of insurtech at Gallagher Re, said: “Now [Q3’s early stage funding figure] is in line with what was happening in Q1 you could, on reflection, say Q2 was probably just a bit muted.

“For the right kind of business, the capital and investors are still there.

”Companies raising money at early stages have got to act differently. People want to see a return on their investment and that tolerance for losses in perpetuity is just drying up.”

By this, Johnston means that even at earlier stage funding, investors are being more vigilant and looking for clear paths to profitability. 

Consistency remains

Overall investment into insurtechs across all stages and all three quarters of this year remained relatively consistent – Q1 was $2,225m (£1,934m), Q2 was $2,410m (£2,095m) and Q3 was $2,348m (£2,041m).

Johnston added: “I generally don’t try and read too much into the numbers of any particular quarter. But when you have three quarters on the bounce, all saying the same thing – that’s something that you can start reading into as a trend.”

Compared to 2021, which saw a plethora of unicorns, the three quarters this year were down, but “at least reasonably consistent”.

He continued: “Having said all that, there’s something quite interesting going on, which is, if you take out the mega rounds from this particular quarter – any deal above $100m (£87m) – it’s very inconsistent relative to if you did that same thing with Q1 and Q2.

The report noted that the number of mega-round insurtech deals increased quarter-on-quarter from six in Q2 to seven in Q3.

Some of these mega-round deals for insurtech in Q3 included Berlin-based Wefox, $400m (£347m) in a Series D and San Francisco-based Coalition, which also launched in the UK this year, in a $250m (£217m) Series F.

“It’s also the first time since the beginning of 2020 where we haven’t got over a billion dollars of investment in non-mega round deals, which is really interesting,” added Johnston. 

• Insurance Times has converted dollar amounts into pounds using an exchange rate of £1 = $1.15 USD, which was correct as of 1 November 2022.