Insurtech Fundraising Rises in Q2 with $1.6 Billion Invested

Following the COVID-19-induced slowdown in global insurtech investment during the first months of 2020, insurtechs raised $1.56 billion during the second quarter.

The total, up 71% over Q1, was driven in part by later-stage investments, including four “mega-rounds” in excess of US$100 million, according to the new “Quarterly InsurTech Briefing” from broker Willis Towers Watson.

At 74, deal count was down 23% from Q1, but many individual rounds were larger as investors continued to turn away from “seed” and “angel” deals in favor of support for more mature ventures, said WTW.

Property/casualty insurance sector investments predominated, accounting for 68% of funding, but the share of life/health sector investments was up 17 points to 32%, as the pandemic crisis continues to compound the value of technology, particularly telehealth, in the segment.

Also notable during the quarter 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. Seed and Series A financing hit a record low, at just 42% of deals.

Series A deals were flat, but Series C deals accounted for 11% of deals, up from 6% 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 re/insurer partnerships reached a record high of 34 deals, up four from Q1 2020.

“While insurtech investment clearly rebounded in Q2, 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,” said Andrew Johnston, global head of Insurtech at Willis Re.

In the short term, investment confidence will test the status quo, especially for highly leveraged insurtechs, and in the medium term, changing risk classes may be better understood alongside rising consumer optimism, but the true economic impact of COVID-19 probably won’t unfold until 2021 and 2022, he added.

“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,” he continued.

In its first quarter report, WTW found that while finding fell 54%, insurtech companies still raised US$912 million.

Most of the funding was completed at the beginning of the quarter.