InsurTech funding has bounced back strongly in the first quarter of 2023, with global investments reaching $1.39 billion, according to the latest Global InsurTech Report from Gallagher Re.
This marks a 37.6% increase from the previous quarter’s lowest total since Q1 2020. While the deal count remained steady, the average deal size increased by 25.3%, the global reinsurance broker noted.
Mega-round funding accounted for only 12.9% of the total, which is the lowest since the dip experienced in Q1 2020. P&C InsurTech funding was the driving force behind the increase in quarterly investment, surging by more than 53% to $967.89 million. L&H fundraising also grew, rising 9.6% to $420.73 million.
Despite the overall positive trend, early-stage L&H funding saw a decline of 44.3% relative to the previous quarter. Nevertheless, the average early-stage deal was up by 28% to $8.31 million. The majority of investments by (re)insurers went into early-stage rounds, a trend that has now been observed for six consecutive quarters.
The latest funding totals suggest that 2023 may mark a return to the more ‘normal’ levels of gently rising InsurTech funding that were experienced before the pandemic. This is in contrast to 2021, when 62% of investments were through mega-rounds, compared to 41% in 2022.
“2023 may be the beginning of a new era for InsurTech. 2021 undoubtedly marked the funding peak, fuelled by Covid-19 uncertainty and an organically occurring crescendo. The sector came back down to earth in 2022, leading to some serious restructures, cost-saving actions, and new business strategies. A lot of companies did not make it through.,” Dr Andrew Johnston, Global Head of InsurTech at Gallagher Re said.
“Founders are now thinking about long-term sustainability and growth, and realizing their businesses will need to pull the plough themselves, reliant on their own capabilities and revenues,” Johnston added.
“A significant upside seems to be the genuine willingness of many (re)insurers, brokers, and agents to adopt technology. The pressure is therefore on InsurTechs to make their businesses palatable and value-adding.”