New funding for the global InsurTech sector rose to $1.39 billion during the first quarter of 2023, up 37.6% from $1.01 billion in Q4, 2022, its lowest quarterly total since Q1, 2020 according to the latest Global InsurTech Report from Gallagher Re.
Average deal size was up 25.3%, but deal count remained steady, the report said. Mega-round funding accounted for only 12.9% of the total, the lowest since the 2020 Q1 dip, the global reinsurance broker said, adding that the sector underwent a ‘broad-based reset in 2022’.
According to Gallagher Re P&C InsurTech funding drove the quarterly investment increase, as it surged by more than 53% to $967.89 million. L&H fundraising also grew, rising 9.6% to $420.73 million. Total early-stage funding was $423.59 million, although early-stage L&H funding plunged 44.3% relative to the fourth quarter of 2022, to $119.04 million. The average early-stage deal was up by 28% to $8.31 million. The majority of investments by (re)insurers went into early-stage rounds, a trend now observed for six consecutive quarters.
The report also said that: “overall funding totals suggest that 2023 may mark a return to the more ‘normal’ levels of gently rising InsurTech funding experienced before 2021, when 62% of investments were through mega-rounds, compared to 41% in 2022”.
Dr Andrew Johnston, global head of InsurTech at Gallagher Re, said: “2023 may be the beginning of a new era for InsurTech. 2021 undoubtedly marked the funding peak, fuelled by Covid-19 uncertainty and an organically occurring crescendo. The sector came back down to earth in 2022, leading to some serious restructures, cost-saving actions, and new business strategies. A lot of companies did not make it through.
“Founders are now thinking about long-term sustainability and growth, and realizing their businesses will need to pull the plough themselves, reliant on their own capabilities and revenues,” Johnston continued. “A significant upside seems to be the genuine willingness of many (re)insurers, brokers, and agents to adopt technology. The pressure is therefore on InsurTechs to make their businesses palatable and value-adding.”
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