Global InsurTech funding dropped 43.7% from USD8.0 billion in 2022 to USD4.5 billion in 2023 -- the lowest level since 2018, according to the Global InsurTech Report by global reinsurance broker Gallagher Re.
The slump in funding was driven by a year-on-year decrease in funding in both Property & Casualty (P&C) and Life & Health (L&H) InsurTech. P&C fell 35.4% to USD3.4 billion, and L&H dropped 59.8% to USD1.1 billion.
In line with a drop in funding, deal count declined year on year from 521 in 2022 to 422 in 2023. P&C InsurTech secured 316 deals and L&H InsurTech, 106 deals, down from 358 and 163, respectively, in 2022. Average deal size also declined to USD13 million in 2023 from USD18.6 million in 2022.
While year-on-year deals were down, global deal share among US-based InsurTechs rose 5.5% between 2022 and 2023 -- the largest gain among all countries. In 2023, the US also was most active with 216 deals – almost seven times as many deals as the next most active nation, the UK, with 31 deals.
2023 also saw USD2.3 billion less in mega-round funding* than in 2022 – a 70.1% year-on-year decline. Mega rounds in the first three quarters of 2023 contributed to 15.5% of total funding, but Q4 accounted for 39.9% of all funding in mega-round deals -- a six-quarter high. Still, 2023 had a historic low rate of mega-round participation as a relative percentage of total activity, at 22%, not seen since 2014.
“Despite lower deal counts and funding, transactions were consistent and continued throughout 2023, indicating a mature and healthy market,” said Andrew Johnston, Global Head of InsurTech, Gallagher Re.
He added: “Whereas 2021 was the peak of the market, and described as the first phase of the InsurTech investment or the ‘Great Experiment’, 2023 could be viewed as the beginning of a new phase involving a sustained change in investor behavior. Will check sizes be smaller but not less frequent? Will mega-rounds become less common? Will the overall flow of deal activity continue? Time will tell, and we may one day reflect that 2023 was an overcorrection, and potentially itself an anomaly.”
What is for certain in 2023 was the increased interest in private technology investments by reinsurers with a record 148 transactions, 12% higher than the previous record of 132 investments in 2019.
“As we have noted in the past – the innovation is not what actually drives change, it is the community coming out and accepting the innovation that ultimately makes the impact,” Johnston said. “Once the value of a new technology is finally realized, its distribution, utilization and scaling can move extremely quickly. It is this second part of the equation that can bring our expectations full circle – back into line with the enthusiasm of a technology’s early advocates.”
Gallagher Re’s Global InsurTech Report
In addition to 2023 InsurTech market analysis, the latest Global InsurTech Report provides: Q4 2023 trends (see highlights below); late-stage growth and view on an exit; case studies of three InsurTechs: Tomorrow.io, Kin, and REVO Insurance; a “View From the Industry” column by Bart Zanelli, Head of Advisory Services for Gallagher Securities; and more.
Q4 2023 Highlights
· Q4 2023 Global InsurTech funding ticked up 0.5% quarter on quarter, attributable to a 93.2% quarter-on-quarter surge in L&H InsurTech funding. Meanwhile, P&C InsurTech funding fell 16.1% quarter-on- quarter.
· InsurTech deals fell 16.0% quarter on quarter – from 119 in Q3 to 100 in Q4. P&C and L&H InsurTech saw deal counts fall quarter on quarter by similar degrees (15.6% and 17.2%, respectively).
· Average InsurTech deal size increased from USD10.4M in Q3 to USD14.1M in Q4, driven by the decline in deals coupled with steady funding levels.
· Mega-round deals as a share of total InsurTech funding increased 21.7 percentage points quarter on quarter.
*Mega-round funding is fundraising of USD100 million or more.
Download the full report here.
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