InsurTech fundraising rebounds in second quarter

Following the COVID-19-induced slowdown in global InsurTech investment during the first quarter, $1.56 billion was raised by InsurTech firms in the second quarter of this year.

The total, up 71 per cent over the first quarter, was driven in part by later-stage investments, including four ‘mega-rounds’ in excess of $100 million, according to the new Quarterly InsurTech Briefing from Willis Towers Watson.

At 74, deal count was down 23 per cent from the first quarter, but many individual rounds were larger as investors continued to turn away from seed and angel investment in favour of support for more mature ventures.

Property and casualty insurance sector investments dominated, accounting for 68 per cent of funding, but the share of life and health sector investments was up 17 percentage points to 32 per cent, as the pandemic crisis continues to compound the value of technology - and particularly telehealth - in the segment.

Also notable was the initial public offering of Lemonade and the acquisition of two incumbent insurance companies by InsurTechs Hippo and Buckle.

Deals were struck in a record-breaking 25 countries, including newcomers such as Taiwan, Croatia and Hungary.

Seed and Series A financing hit a record low though, at just 42 per cent of deals. Series A deals were flat, but Series C deals accounted for 11 per cent of deals, up from six per cent the previous quarter.

New (re)insurer partnerships reached a record high of 34 deals, up four from the first quarter.

Andrew Johnston, global head of InsurTech at Willis Re, said: “While InsurTech investment clearly rebounded in the second quarter, 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," he continued. "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."

Johnston added that long-term 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 - if the funding gap between seed and later stages continues to widen then many InsurTechs will struggle to acquire the funds required for maturing growth."

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