There is a growing realisation that incumbents are to be supported, not displaced - Gallagher Re

$2.35 billion of global insurtech-sector investment was made in Q3 2022, just 2.5% down from Q2’s total, but the headline figure masks significant dynamics. Early-stage funding soared by 48.1% quarter on quarter, driven by the second-highest quarterly number of seed-funding deals ever.

At the other end of the spectrum, P&C InsurTechs garnered $1.2 billion in mega-round funding through investments of $100 million or greater, double that of Q2, according to the latest quarterly Global InsurTech Report from Gallagher Re, the global reinsurance broker, published today.

Despite the mega-rounds, average deal size fell 7.6% to $20.42m in Q3. The decline reflects the volume of early-stage funding; total deal count was up 6.1%, to 140 deals.

Total funding of P&C InsurTechs was up 18.8% to $1.77 billion. (Re)insurers made 24 investments, pushing the market towards a three-year high for strategic funding in 2022.

Theme is increasingly collaboration, not disruption

Dr Andrew Johnston, global head of InsurTech at Gallagher Re, said: “Third-quarter investments this year were made at a particular inflection point for the global InsurTech sector. Pressure is mounting on those companies that sold the idea of endless growth to secure funds.

“The extent to which some founders truly believed they could grow their businesses (to the degree they were indicating) in our industry will always be a topic for discussion, but it seems very clear now that the era of rushed growth for growth’s sake at the expense of profitability is coming to a close.

“Hubristic rhetoric around ‘disruption’ is declining in sequence with the growing realisation that profitable carriers (no matter how ‘outdated’), intermediaries, and traditional markets are to be supported, not displaced.

”Genuine disruption has been extremely limited despite almost $50 billion of global InsurTech investment. Success has typically come only in areas where incumbents have been embraced and respected.

”Meanwhile, there’s increasing pressure on risk-originating InsurTechs operating as MGAs to begin partaking in the process of retaining risk, which in practice makes them more like incumbents.”

The Q3 2022 report covers Asia Pacific, and opens with a ‘snapshot’ of InsurTech in the region. Q3 2022 was the region’s highest funding and deal count in the year to date, with APAC-based InsurTechs having raised a total of $999.77m across 76 deals.

In this most recent quarter, 53.5% of all disclosed APAC funding went into India-based InsurTechs, which raised an impressive $210.76m.