InsurTech investments reached an historic high in 2019, according to a new briefing on the sector from Willis Towers Watson.
But 2019 also capped a three-year period where many InsurTech startups called it quits. Dozens have quietly closed up shop, noted Andrew Johnston, global head of InsurTech at Willis Re.
“While InsurTech news is awash with the huge valuations and postulations of the art of the possible, there is also a very real story that is not so positive – individual InsurTech cessations,” Johnston said in prepared remarks. “The number is very difficult to calculate, but our data indicates that during the past three years, approximately 184 funded InsurTechs might have closed their doors.”
Total new global funding commitments to InsurTech hit $6.37 billion for the year, with approximately $2 billion coming in for 75 projects during the 2019 fourth quarter alone, the Willis Towers Watson Quarterly InsurTech Briefing noted.
Johnston said that 2019 was the year that many InsurTechs began to take leadership positions in certain parts of the market, either in certain lines of business or in the use of certain technologies.
“For example, UK-based Concirrus is now clearly the forerunner in behavioral-based analytics for the specialty markets,” Johnston claimed.
The Willis Towers Watson report suggests that the number of InsurTechs that have closed up shop might actually be much larger than its 184-company estimate. The reason: tracking a company is possible only after it raises money, and many don’t raise investment funds.
“Based on the number of companies that have raised some form of capital and subsequently ceased trading, relative to the number of self-identifying InsurTechs that we believe exist globally, the total number of InsurTechs that have possibly ceased to trade (or are at least considered “vulnerable”) could be many times this number, the report explained. “One thing is clear: InsurTechs operating in obscurity have very short shelf lives if the capital injected at an early level fails to support commercial germination.”
On the positive side, Willis Towers Watson cites a number of related InsurTech investment milestones for the year, such as eight “unicorn making” rounds of investment that led to five new unicorns – privately held startups valued at over $1 billion. That’s out of only 10 InsurTechs total around the world that have reached this threshold.
Other InsurTech investment trends Willis Towers Watson noted from 2019:
- There was a 90 percent jump in investment rounds that exceeded $40 million.
- For the fourth quarter, InsurTechs raised $244 million in early stage funding.
- P/C start-ups continued to win more InsurTech investment than their life and health counterparts, a trend in play since the 2016 third quarter.
- Early stage funding to P/C companies grew to 69 of the total, up slightly compared with the previous quarter. Of the InsurTech and investment totals, distribution and MGA-focused InsurTechs accounted for 57 percent.
Source: Willis Towers Watson