New data from reinsurance broker Gallagher Re shows that global insurtech investment declined by 57.0% to $1.01 billion in the fourth quarter of 2022, when compared with the previous quarter.
According to the broker’s Global InsurTech Report, this means that insurtech funding is at its lowest quarterly point since Q1 2020.
The situation is worst in the property and casualty sector, where Q4 funding slumped by 64.4% to $630.16 million, while total Q4 investments in life and health fell by 33.7% to $383.76 million.
The performance drove annual total funding for 2022 down by 49.5% from 2021, to $7.98 billion.
Gallagher Re also reports that average deal size across 106 rounds declined 42.3% to $11.79 million and that insurtechs attracted $6.51 billion less in mega-round funding – a 66.7% year-on-year drop.
Early-stage funding declined less dramatically, falling 25.1% quarter-on-quarter to $408.27 million in Q4, driven by a 51.3% drop in early-stage P&C funding over 50 deals averaging $4.63 million.
And despite the overwhelming trends, Gallagher Re found that early-stage L&H funding actually increased in Q4, by 46.5% to $213.64 million, driven by four deals greater than $40 million.
“At the end of 2019, we estimated the total number of InsurTech businesses globally at 3,000, but now only about 2,050 are actively open for business,” Andrew Johnston, Global Head of InsurTech at Gallagher Re.
“Meanwhile, venture capitalists are focused on profitability and well-understood KPIs,” he continued. “Capital is available, but investment dropped dramatically in 2022 from 2021, with 2021 arguably marking the ‘peak of expectations’. The most significant feature of 2022 is that the narrative around ‘disruption’ seems to be truly over.”
The report shows that the top seven recipient countries for insurtech investment in 2022 were the US, the UK, Germany, France, India, Israel, and Australia, all of which topped $200 million, but US companies, at $4 billion, received 35% more investment than the next six countries combined.
While conditions were broadly challenging, analysts note that a small number of individual businesses did perform remarkably well, with Combinator recording the highest number of individual deal, at 17 rounds completed, followed by Gaingels and Anthemis with 12 deals each
“2022 has prompted an exodus of third-party capital providers, causing the sector to refocus on the real prize: wider adoption of appropriate technology to make the entire process of insurance more efficient, cost effective, and less complex leading to an improved customer experience,” Johnston explained.
In terms of total investment value, Greycroft topped Gallagher Re’s list, having invested $699 million over nine transactions during the year. Next is OMERS Ventures with $592 million recorded, including a share of Q4’s only mega-round, for Clearcover. And third was Allianz X, with $565 million across three deals.
