Insurtech fundraising rebounds in Q2 2020

The total, up 71% over Q1 2020, was driven in part by later-stage investments, including four mega-rounds worth in excess of $100 million

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Insurtech fundraising rebounds in Q2 2020

Global insurtech investment bounced back in Q2 2020 to $1.56 billion after a Covid-19-induced slowdown, according to insurance adviser and broker Willis Towers Watson.

The total, up 71% over Q1 2020, was driven in part by later-stage investments, including four mega-rounds worth in excess of $100 million.

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 favour of support for more mature ventures.

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

Also notable 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, including newcomers such as Taiwan, Croatia and Hungary, according to Willis Towers Watson.

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 startups saw an 11-point rise in deal share, while B2B companies reduced their share by nine points. New insurer and reinsurer partnerships reached a record high of 34 deals, up four from Q1 2020.

Dr Andrew Johnston, global head of insurtech at Willis Re, cautioned against reading too much into the investment resurgence: “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.”

“In the short term, investment confidence will test the status quo, especially for highly leveraged insurtechs. Similarly, certain risks and their associated vectors have changed fundamentally and so the impact of that is yet to be truly felt. It is quite possible that we will observe a general slowing down of insurtech activity as a result.”

Johnston continued: “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. This will undoubtedly impact many (re)insurers’ appetite to invest in or deploy technology.”

“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. Equally, such changes will create opportunities for others. If the funding gap between seed and later stages continues to widen then many insurtechs will struggle to acquire the funds required for maturing growth.”