According to Gallagher Re’s latest Global InsurTech Report, new funding for the global InsurTech sector hit $1.1 billion in Q3 of 2023.
As per the reinsurance broker’s report, this was mainly driven by a 25.5% quarter-on-quarter surge in P&C InsurTech investment.
Gallagher noted that this rise occurred even as average deal size fell 16.4% quarter-on-quarter to a six-year low of $10.3 million, while Life & Health InsurTech investment slipped a further 4.5% quarter-on-quarter to $166.6 million.
Meanwhile, in line with funding, the quarterly InsurTech deal count increased from 97 in Q2 to 119 in Q3, the most since Q3 2022. Of this, P&C InsurTech saw 90 deals, and Life & Health InsurTech, 29.
United States-based InsurTechs saw 55.4% of global InsurTech deal share in Q3 2023, the highest level since Q1 2020.
Gallagher Re’s report also observed that early-stage InsurTech funding increased 24.7% quarter-on-quarter to $269.45 million, as the number of early-stage deals rose from 51 in Q2 to 71 in Q3.
Re/insurers made 34 InsurTech investments, the majority of which – for the fifth consecutive quarter – were in the early-stage category (61.8%).
Q3 saw 10 seed/angel-stage investments and 11 Series A investments by trade players. MassMutual Ventures led the activity with seven investments. Three or more investments each were made by Avanta Ventures (part of CSAA), MS&AD Ventures and Munich Re Ventures.
Dr. Andrew Johnston, Global Head of InsurTech at Gallagher Re, commented, “We continue to move through a crucial inflexion point of global InsurTech, from phase one, the ‘great experiment’ to phase two focused on sustainable, profitable business outcomes through precision, not volume.
“The third quarter provided us with some very thought-provoking examples of what this change looks like at an individual company level, for both InsurTechs and investors.”
Johnston continued, “However, it’s clear painful truths are emerging as a direct result of the lessons not learned during phase one including how capital was raised, from whom, and at what valuations, and how it was managed and spent. With wealthy backers writing enormous checks, InsurTechs could ignore the importance of loss ratios or customer retention.
“They – and their investors – could instead focus on metrics like growth and divergence and miss the extremely important lessons that ultimately must be learned to survive.
“When learned, companies have been able to transition into InsurTech phase two. Now more than ever, technology and new entrants can play a critical role in preserving and fortifying the value of reinsurance. InsurTechs in phase two can, for example, support better risk selection, portfolio optimization, use of relevant data and engagement with digitally-native consumers.”