Q2 sees investment of USD917 million into “extremely healthy, vibrant” InsurTech space

Q2 sees investment of USD917 million into “extremely healthy, vibrant” InsurTech space 150 150 Haggie Partners

As incumbent (re)insurers stepped-up their investment activity, new funding for the global InsurTech sector slipped to USD916.71 million during the second quarter of 2023, down 34.0% from USD1.39 billion in Q1 2023, pushing the quarterly total below USD1B for the first time in three years.

However, average deal size fell by a much smaller degree – 16.1% – to USD12.39M in Q2, across only 97 investments, according to the latest Global InsurTech Report from Gallagher Re, the global reinsurance broker.

Early-stage funding was its lowest since Q3 2017. L&H early-stage investments totaled just USD58.34M, while P&C early-stage funding slumped to USD157.71M. The average deal size for the sub-category slid to USD5.27M across 51 investments. Meanwhile, 17 “acceleration” category deals attracted USD134.49M, or 14.7% of total InsurTech funding for the quarter, a lower share than has been the norm. Only one Q2 deal qualified as a mega-round, Baring’s USD150M Series B investment in Accelerant, marking the third consecutive quarter with only one mega-round.

(Re)insurers made 43 InsurTech investments in Q2, most in early-stage deals including 12 seed investments and 14 Series A investments. Munich Re Ventures led the activity with six, while MassMutual Ventures made five and Aviva Ventures, MS&AD Ventures, and Nationwide Ventures each made three.

Dr Andrew Johnston, Global Head of InsurTech at Gallagher Re, said: “During InsurTech’s primary phase, from 2012 to 2021, about USD42B 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. 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.”

Global InsurTech Report

The Q2 edition of Gallagher Re’s Global InsurTech Report is the second of four to explore the lifecycle stages of InsurTech funding, and considers early-stage acceleration rounds, or Series A. It includes case studies of four InsurTechs that recently completed acceleration fundraisings. These include Optimity, which aims to foster a healthier insured population; SEND, which has developed an AI-enriched underwriting workbench; Carrot General, a full-stack 100% digital insurance auto carrier; and Angle Health, a digital healthcare benefits platform.

The Report’s ‘Incumbent Corner’ features the (re)insurer QBE and its QBE Ventures, which invests in and partners with early and growth stage InsurTechs to help accelerate their delivery of key strategic priorities. ‘Intelligence Partner’ looks at Slipcase, the insurance-focused news and content curation platform. ‘Thoughts from Investors’ includes:

1. A Q&A with Tiffine Wang of MS&AD Ventures, who discusses topics ranging from balancing a portfolio of InsurTech investments to expanding the InsurTech ecosystem, and
2. A Q&A with Eos Venture Partners, an early-stage InsurTech fund focused on Series A investments.

‘Deal of the Quarter’ looks at Capitola, a digital marketplace for commercial insurance brokers and carriers active in property, casualty, and specialty lines. In April Capitola announced a USD15.6M Series A round led by Munich Re Ventures.

‘View from the Industry’ is contributed by Paolo Cuomo, Executive Director of Strategic Advisory at Gallagher Re. He says: “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.”

Finally, the Q2 2023 edition of the Global InsurTech Report looks at InsurTech ecosystem partner Lloyd’s Lab, the multifaceted incubator based in the eponymous Lloyd’s of London insurance market. Lloyd’s Lab has supported the development of a range of increasingly familiar InsurTech businesses, in part by matching them with appropriate market-based mentors.

View the full report here.