InsurTech venture capital investments rebounded strongly in the second quarter after a pummeling earlier in the year due to growing pandemic-related uncertainty in the financial markets.
Firms in the sector raised $1.56 billion in the second quarter, a 71 percent increase over the first quarter. Money raised included four “mega-rounds” in excess of $100 million, according to the new “Quarterly InsurTech Briefing” from broker Willis Towers Watson.
Andrew Johnson, global head of InsurTech at Willis Re, noted the sector’s Q2 venture capital rebound, but cautioned that there are aren’t yet clear signs of a longer-term trend.
“We should be cautious and not read too much into the general state of the global InsurTech market based on this quarter alone,” Johnson said in prepared remarks.
He explained that investor confidence, particularly for highly leveraged InsurTechs, will test investment confidence in the short term. He added that “certain risks and their associated vectors” have seen fundamental changes through the pandemic, with their full impact not yet felt. That means InsurTech investment activity may yet avoid an upward trend.
“It is quite possible that we will observe a general slowing down of InsurTech activity as a result,” he said.
The full economic impact of COVID-19 on may not be fully known until 2021 or even 2022, Johnson said, and that could harm both investor interest in InsurTech, but also insurer or reinsurer interest in fueling those investments or buying related technology products.
In its first quarter report, WTW found that while funding fell 54 percent, InsurTech companies still raised $912 million, with most of the funding completed at the beginning of the quarter before the coronavirus pandemic began to spread globally.
In April, Carrier Management reported that InsurTech financings in the 2020 first quarter dropped by half compared to the same period a year ago.
Deal Numbers Down; Deal Value Up
In the second quarter, Willis Towers Watson counted 74 deals, down 23 percent from the Q1 deal count. But many individual rounds were larger as investors continued to turn away from “seed” and “angel” deals in favor of more mature startups, WTW said.
Out of the total Q2 InsurTech funding amount, 68 percent of the total went to the property/casualty insurance sector. Life/health sector investments accounted for 32 percent of the total, up 17 points from the previous quarter. Willis Tower Watson said that telehealth and other remote-related technology relating to healthcare helped drive that increase.
Deals were struck in a record-breaking 25 countries, Willis Towers Watson said, including newcomers such as Taiwan, Croatia and Hungary.
Seed and Series A financing hit a record low, at just 42 percent of deals. Series A deals were flat, but Series C deals accounted for 11 percent of deals, up from 6 percent the previous quarter. Distribution-focused start-ups saw an 11-point rise in deal share, while B2B companies reduced their share by nine points. New insurer/reinsurer partnerships reached a record high of 34 deals, up four from Q1 2020.
Johnson said that InsurTechs may struggle to survive especially if their post-lockdown clients have shifted their priorities, though he noted that the pandemic will create opportunities for others. He also expressed concern about the gap between seed and later stage funding successes, suggesting it could point to a longer-term problem.
“If the funding gap between Seed and later stages continues to widen,” Johnson said, “then many InsurTechs will struggle to acquire the funds required for maturing growth.”
Q2 Successes, Broken Down.
A number of InsurTechs had successful venture capital events in the second quarter.
- Pie Insurance, a workers comp InsurTech startup, pulled in $127 million in new financing and capital commitments.
- Coalition, an InsurTech focused on cyber insurance and security, raised $90 million.
- Aclaimant, a safety and risk management software startup, pulled in $10 million.
- Immuta raised $40 million. The startup’s technology automates the process of protecting and managing data.
- Openly, a high-end home insurance MGA, raised $15 million.
- Planck raised $16 million to fuel expansion of its AI-driven commercial insurance data platform.
Source: Willis Towers Watson
*A version of this story ran previously in our sister publication Insurance Journal.