Insurtech IPOs ‘slowing down’ after investment downturn

Insurtech initial public offerings (IPOs) have been “slowing down” following a downturn in investments, according to Lynda Clarke, chief operating officer at Tribe Payments.

An IPO is when a private firm sells shares of its stocks for the first time to the public, according to Investopedia.

Many insurtechs use IPOs to raise capital and tap new opportunities.

However, according to Clarke, the insurtech industry suffered the “largest investment drop in H1 2024”.

She told Insurance Times: “[It] attracted $1.6bn (£1.22bn) in investment, less than one-quarter of the $8.2bn (£6.25bn) seen in 2023,” she said.

She added: “As with other areas of tech, insurtech IPOs and IPOs in general have been slowing down. The global tech sector has suffered an investment downturn and companies going through investment rounds are undergoing a lot more scrutiny.”

Why the drop?

Clarke explained that insurtech investments plummeted over the last couple of years “due to soaring inflation and rising interest rates”.

She added: “Potential insurtech investors are getting more nervous and risk averse and the path towards an IPO becomes a lot harder and longer to navigate. The multipliers that analysts are looking at means that companies are getting a lot less in regard to valuations at the moment.

“An IPO gets even more difficult to do navigate when the stock market dips and we all know tech stocks in particular have been on a bumpy ride lately. Add in the fact that many potential and current stock market listings appear to be shunning London to list overseas instead, attracted by bigger pools of investors. There’s a distinct lack of confidence in the market and it’s not necessarily a good time to IPO, unless you have a really unique business.”

However, to help revive the UK equity market and IPOs, the FCA launched a listing regime in collaboration with the government in July 2024.

The reform sets out a simplified listings regime with a single category and streamlined eligibility for those companies seeking to list shares in the UK.

Sarah Pritchard, executive director for markets and international at the FCA, said: “A thriving capital market is vital in delivering investment to growing companies plus returns and choice to investors.”