InsurTech investment bounces back in Q2

InsurTech investment during the second quarter of the year showed signs of recovery following an industry-wide slowdown in the wake of Covid.

Investment totalled $1.56bn (£1.2bn) in the period, marking a 71% surge in investment against the first quarter. 

This was driven in part by later-stage investments, including four ‘mega-rounds’ in excess of $100m (£77m), according to the latest quarterly InsurTech Briefing from Willis Towers Watson.

While the deal count fell by 23% to 74, more individual rounds were larger than the previous quarter, as investors continued to turn away from Seed and Angel deals in favour of “more mature” ventures. 

The property and casualty sector accounted for 68% of funding, while the share of life and health investments rose by 17 points to 32%, as the crisis “continued to compound the value of technology, and particularly telehealth”. 

Deals were struck in a “record-breaking” 25 countries, though Seed and Series A financing struck a “record low”, marking only 42% of deals in the period. 

While Series A deals were flat, Series C investments accounted for 11% of deals, marking a 5% rise from the previous quarter. 

Distribution-focused start-ups saw an 11% increase in its deal share, while B2B companies reduced their share by 9%. Nonetheless, new (re)insurer partnerships reached a “record high” of 34 deals, up from the four reported in the first quarter. 

Dr Andrew Johnston, global head of InsurTech at Willis Re, said: “While InsurTech investment clearly rebounded in Q2, and the trend towards greater commitments to later-stage fundraisings continues, we should be cautious and not read too much into the general state of the global InsurTech market based on this quarter alone. 

“In the short term, investment confidence will test the status quo, especially for highly leveraged InsurTechs. Similarly, certain risks and their associated vectors have changed fundamentally and so the impact of that is yet to be truly felt. It is quite possible that we will observe a general slowing down of InsurTech activity as a result.”

He added: “In the medium term, changing risk classes may be better understood alongside rising consumer optimism, but the true economic impact of COVID-19 probably won’t unfold until 2021 and 2022. 

“This will undoubtedly impact many (re)insurers’ appetite to invest in or deploy technology. Survival may be a challenge for some InsurTechs, especially if their use-case has been lost forever due to underlying societal change following the lockdown. Equally, such changes will create opportunities for others.”

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