Solid investor appetite for new and mature opportunities in the InsurTech sector was again in evidence during Q3 2020, as US$2.5 billion was raised by InsurTech firms across 104 deals, up 63% and 41% respectively over the prior quarter. Deals included two US$500 million rounds, but the mid-tier funding gap for firms seeking investments in the US$20 million to US$50 million range has widened, according to the new Quarterly InsurTech Briefing from Willis Towers Watson, a leading global advisory, broking and solutions company (NASDAQ: WLTW).
Six mega-rounds of US$100 million or more accounted for more than two thirds of total funding, including Bright Health, Ki, Next Insurance, Waterdrop, Hippo, and PolicyBazaar. Early-stage deal share grew to 57%, up 15 points to pre-COVID-19 levels, bolstered specifically by P&C start-ups. More than half of InsurTechs with a Q3 Series A round were raising capital for the first time and raised on average US$10.9 million. InsurTech companies seeking mid-tier Series B and C investments, however, saw deal share shrink by almost 9 percentage points. Non-industry investors including venture capital and private equity predominated in the smaller rounds, and re/insurers in the larger end.
P&C sector investments predominated, but the share of L&H sector investments rose, up 3 points in Q3 2020 to 30%. This was driven by a disproportionate amount of L&H funding in the mega-rounds receiving true ‘growth’ capital, with L&H accounting for three of the six deals, and 49% of total Q3 mega-round funding.
Dr. Andrew Johnston, global head of InsurTech at Willis Re, said: “With everyone working from home, never has the true value of technology been more real and manifest in our industry. But most re/insurers are looking either to accelerate, conclude, or temporarily slow down their ancillary technological endeavours and focus instead on ensuring their core business functions operate efficiently in the new digital, remote environment. Consequently, their appetite to support well-established InsurTechs is much greater than for those who still have things to prove. That means the lifeblood of budding InsurTechs who rely on Series B and Series C rounds to scale up has, relatively speaking, disappeared.”