The global InsurTech sector witnessed a substantial decline in new funding during the second quarter of 2023, amounting to $916.71 million, marking a 34.0% drop from the impressive $1.39 billion recorded in the preceding quarter, according to the latest findings unveiled by reinsurer Gallagher Re.
This dip has pushed the quarterly funding total below the billion-dollar mark for the first time in three years.
While the investment volume experienced a notable decrease, the average deal size encountered a relatively moderate decline of 16.1%, settling at $12.39 million for Q2.
The quarter saw a total of 97 investments, signifying a shift in investment strategy within the sector. These revelations come as incumbent (re)insurers take center stage, intensifying their investment activity in the dynamic and rapidly evolving InsurTech landscape.
Notably, early-stage funding within the InsurTech sector has hit its lowest point since Q3 2017. Investments in Life & Health (L&H) early-stage ventures amounted to $58.34 million, while Property & Casualty (P&C) early-stage funding slumped to $157.71 million.
The average deal size within this sub-category experienced a drop, landing at $5.27 million across 51 investments. Interestingly, the “acceleration” category, characterised by deals aimed at propelling startups into rapid growth, accounted for $134.49 million or 14.7% of the total InsurTech funding for the quarter. This represents a departure from the established norm, as the sector seeks new avenues for growth and development.
During the second quarter, only one deal qualified as a mega-round, a notable shift from previous quarters. Baring’s $150 million Series B investment in Accelerant secured the coveted mega-round status, marking the third consecutive quarter with just one such deal. This shift in mega-round dynamics further underscores the evolving investment landscape within the InsurTech sector.
The (re)insurers were highly active contributors to the second-quarter investment landscape, accounting for a total of 43 InsurTech investments. These investments were primarily concentrated in early-stage deals, including 12 seed investments and 14 Series A investments.
Munich Re Ventures emerged as a key player in this arena, leading the pack with six investments. MassMutual Ventures closely followed with five investments, while Aviva Ventures, MS&AD Ventures, and Nationwide Ventures each made three investments, showcasing their commitment to fostering innovation within the sector.
Dr. Andrew Johnston, the esteemed Global Head of InsurTech at Gallagher Re, offered insightful commentary on this shifting trend. He emphasised, “InsurTech is now in a secondary phase focused on beneficial deliverables, rather than digital usurpation and quick cash.”
He highlighted the transition from a technology-driven approach to a more outcome-oriented strategy, driven by incumbent insurers’ rapid adoption of technological advancements. This shift is expected to pave the way for InsurTech startups to play a crucial role in supporting traditional insurers through innovative technological solutions.
