InsurTech investments have continued to grow, with a record-breaking 66 investment deals worth a total of $724 million recorded during the first quarter of 2018, according to the latest quarterly report from re/insurance broker Willis Towers Watson and CB Insights.
Q1 2018 investment volume was only 16% greater than the $624 million recorded in Q4 2017, but represented an increase of 155% when compared with Q1 2017.
Willis also suggested that, as transaction sizes continue to grow, the line between InsurTech funding by incumbent re/insurers and traditional venture capital is becoming increasingly blurred by newer ‘hybrid’ investment funds.
Its report observed that 7 deals completed in Q1 2018 were worth over $30 million, and concluded that re/insurance incumbents tend to favour investments in start-ups whose technology will ease their own commercial pressure points, such as distribution costs, claims handling, and underwriting excellence, rather than those that deliver the greatest investment return.
In contrast, traditional venture capital investors generally focus on InsurTechs that address customer pressure points, such as price, ease of access, and underserved markets, and tend to be driven solely by investment return, with little meaningful access to the re/insurance market.
However, many specialist re/insurance investors are now developing ‘hybrid’ investment models that combine the traditional venture capital investor mentality with the industry expertise of incumbents to target both financial and strategic returns for investors.
Rafal Walkiewicz, Chief Executive Officer (CEO) of Willis Towers Watson Securities, said: “For InsurTech start-ups, the funding scene is more complex, and finding the right investment partner has become more difficult. Hybrid models will continue to evolve, and may be the ultimate answer for InsurTech entrepreneurs looking to balance industry expertise and the traditional VC value-creation mentality.”
Paddy Jago, Global Chairman of Willis Re, added: “The incumbent market has actually been relatively receptive to taking a serious look at the digital innovation that is going on around us, and those driving it. Most of us know that to remain relevant, we need to embrace change. I have always believed that we cannot view change and not change ourselves.”
