Insurtech funding falls for Q2 2023 – Gallagher Re

Global insurtech sector funding slipped to $916.71m (£723.93m) during the second quarter (Q2) of 2023, according to Gallagher Re’s latest report, published yesterday (3 August 2023).

The Global Insurtech Quarterly report revealed that funding for Q2 was down by 34% compared to Q1, when it stood at $1.39bn (£1.10bn).

This significant fall brings quarterly global insurtech funding below $1bn (£790m) for the first time in three years.

Andrew Johnston, global head of insurtech at Gallagher Re, said: “During insurtech’s primary phase, from 2012 to 2021, about $42bn was invested.

“The focus was on technology, the ‘how’ rather than the ‘what’, but up to a third of those insurtechs no longer trade.

“Insurtech is now in a secondary phase focused on beneficial deliverables, rather than digital usurpation and quick cash. The whole insurtech phenomenon instilled a new understanding of the importance of technology in our sector.”

Flight to maturity

Reinsurers stepped up their investments in insurtech firms in Q2 and made 43 in total, with most of these investments coming as early stage deals. There were also 12 seed investments and 14 series A investments from reinsurers.

Munich Re Ventures made the first six of these while MassMutual Ventures made five. Aviva Ventures, Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance (MS&AD) and Nationwide Ventures each made three.

Early stage funding for insurtechs reached its lowest point since 2017, with property and casualty-focused firms seeing early stage funding slump to $157.71m (£124.74m)

The UK was ranked second in early stage funding with 12 deals and $358.46m (£283.08m) invested.

The US topped the chart, with 62 deals and $810.22m (£639.83m) in investment. Italy came last with only $12.24m (£9.67m) invested and one deal – although several other countries only made one deal, including Egypt, Brazil, and Kenya.

Meanwhile, average deal size fell by 16.1% to $12.39m (£9.78m) in Q2 across 97 investments.

Paolo Cuomo, executive director of strategic advisory at Gallagher Re, said: “I’ve seen a real flight to maturity by investors over the last two or three years. They increasingly seek confidence that those they are backing can convert the idea into a source of recurring revenue and manage the challenges of keeping the startup going through the long sales cycles common in insurance.

“A track record of the founders making tough decisions is also regarded as important when seeking series A funding.”

Only one Q2 deal qualified as a mega-round – Baring’s $150m (£118.45m) series B investment in Accelerant – marking the third consecutive quarter with only one mega-round of funding.

Johnston added: “Rapid and accelerating adoption by incumbent insurers has created a huge opportunity for insurtechs to support incumbents through technological innovation.

“Those presenting clear commercial outcomes for themselves and their clients will benefit from investors’ more realistic sense of what can be achieved.”

• Insurance Times has converted dollar amounts into pounds using an exchange rate of $1.28 = £1, which was correct as of 1 August 2023.