Down 34%, Funding For Insurtechs Sees Steep Decline in Q2-2023

Global insurtech funding fell 34% in the second quarter of 2023 compared to the first quarter, dropping below $1 billion for the first time since early 2020, according to a new report from Gallagher Re, the reinsurance brokerage arm of Gallagher.
The decline was seen across life and health (L&H) and property and casualty (P&C) insurtechs. L&H insurtech funding fell 58.5% from the first quarter, while P&C insurtech funding declined 22.3%. The average insurtech deal size also dropped but to a lesser degree, from $14.77 million in the first quarter to $12.39 million in the second quarter.

The insurtech sector continues to grow and mature

Despite the funding decline, Dr. Andrew Johnston, global head of Gallagher Re Insurtech, said in the report that the insurtech space remains “extremely healthy” and “continues to grow and mature.” He said the recent rise in early-stage deals and relative lack of mega-rounds indicate a naturally evolving market focused more on long-term sustainability versus quick returns.

Startups had the largest drop in funding since 2017

The report noted that early-stage insurtech funding saw the largest percentage drop since 2017, though the number of early-stage deals fell slightly. Johnston said the investors and the insurtechs themselves have changed during the recent market correction, with those focused on clear commercial outcomes gaining more traction than those offering only technology. However, the report also states that insurer and reinsurer corporate venture capital (CVC) arms have become much more active in early-stage insurtech investing, now representing a greater portion of total insurtech investors than ever. Johnston said CVCs are realizing insurtech remains a big opportunity for incumbents under the right circumstances and know how to obtain what they need.

Mega-round fundings of $100 million or more declined to a three-year low

Mega-round funding of $100 million or more also hit its lowest point since early 2020, with only one $150 million deal in the second quarter. But mega-rounds still comprised over 16% of total insurtech funding for the quarter, given the overall decline.

Munich Re led the quarter with six insurtech investments

Munich Re Ventures led CVC activity in the second quarter with six insurtech investments. Other top corporate venture investors included MassMutual Ventures, Aviva Ventures, MS&AD Ventures, and Nationwide Ventures. Gallagher Re’s report suggests 2023 is on pace to be a record year for insurer and reinsurer investments, as opposed to venture capital firms, into insurtech firms.

A copy of the free 96-page report can be found on Gallagher Re’s website by clicking: HERE.