This increase in global InsurTech funding, after dipping to a recent low in Q2 2023, attributable to P&C InsurTech, which saw a funding jump 25.5% quarter on quarter from $742.29mn to $931.32mn.
However, life and health (L&H) InsurTech funding dipped 4.5% quarter on quarter to $166.6mn. The average size across 119 deals dropped to a six-year low at $10.36mn — falling 16.4% quarter on quarter — from $12.39mn in Q2.
Andrew Johnston, global head of InsurTech at Gallagher Re said: “We continue to move through a crucial inflection point of global InsurTech, from phase one, the ‘great experiment’ to phase two focused on sustainable, profitable business outcomes through precision, not volume.”
“The third quarter provided us with some very thought-provoking examples of what this change looks like at an individual company level, for both InsurTechs and investors."
The report highlighted an increase in early-stage InsurTech funding which coincided with an increase in early-stage deals, from 51 in Q2 2023 to 71 in Q3.
Despite the increase, early-stage funding remains down from recent quarters before Q2 2023, it said.
Notably over the quarter, (re)insurers made 34 InsurTech investments, the majority of which (61.8%) were in the early-stage category.
The report also noted that Q3 saw 10 seed and angel-stage investments and 11 Series A investments by trade players. MassMutual Ventures led the activity with seven investments and three or more investments each were made by Avanta Ventures, MS&AD Ventures and Munich Re Ventures.
In an interview with sister publication Insurance Insider, Johnston said the increased private investments being made from (re)insurers is "definitely a theme of the year", describing the trend as "a very positive signal that insurers reinsurers are investing in technology versus speculative capital investors”.
He added that this year seems to be "one of consistency", adding that the year has seen “a realignment of people's expectations relative to the hype seen two or three years ago”.
Johnston expects that the market will start to see an uptick in activity in the next year or so as companies get more comfortable with what the InsurTech proposition ultimately is. “People are still grappling with what InsurTech strategy means to their business," he said.
From 2025 onwards, Johnston said that a slow uptick in the market will depend on whether the term “InsurTech” survives, a scenario he thinks is unlikely.
“The label 'InsurTech' doesn't really mean anything anymore,” he said, adding that it would be more remarkable if a company tried to break into the industry right now that was not somehow technologically enabled.
Any potential volatility in the data reporting can be attributed to the InsurTech label as it comes “under a magnifying glass”, according to Johnston. “But on the basis that it doesn't, I think we'll see a slow uptick.”
