Global insurtech investment fell in the fourth quarter of 2022 to its lowest level since the third quarter of 2020, according to a new report from Gallagher Re. Investment declined 57% from the third quarter of 2022, the report said.
Insurtech funding in property and casualty plummeted 64.4% to US$630.16 million in Q4, while total investments in life and health fell 33.7% to US$383.76 million.
Average deal size across 106 rounds fell 42.3% to US$11.79 million, the report found. Total funding for 2022 was down by 49.5% from the prior year, to US$7.98 billion. Insurtechs also attracted US$6.51 billion less in mega-round funding in 2022 – a year-over-year decline of 66.7%.
Early-stage funding fell 25.1% quarter over quarter to US$408.27 million in Q4, driven by a 51.3% decline in early-stage P&C funding over 50 transactions averaging US$4.63 million, Gallagher Re said. Early-stage L&H funding, however, increased by 46.5% to US$213.64 million in Q4, driven by four deals exceeding US$40 million.
“At the end of 2019, we estimated the total number of insurtech businesses globally at 3,000, but now only about 2,050 are actively open for business,” said Dr. Andrew Johnston, global head of insurtech at Gallagher Re. “Meanwhile, venture capitalists are focused on profitability and well-understood KPIs. capital is available, but investment dropped dramatically in 2022 from 2021, with 2021 arguably marking the peak of expectations. The most significant feature of 2022 is that the narrative around ‘disruption’ seems to be truly over.”
Johnston said that a small number of individual businesses – all of which treat the industry as a community – did remarkably well in 2022.
“2022 has prompted an exodus of third-party capital providers, causing the sector to refocus on the real prize: wider adoption of appropriate technology to make the entire process of insurance more efficient, cost-effective, and less complex, leading to an improved customer experience,” he said.
Gallagher Re’s Q4 Global InsurTech Report also compiled a list of 2022’s insurtech investment frontrunners. Leading with the highest number of individual deals was Y Combinator, which completed 17 rounds. Second place was shared by Gaingels and Anthemis, which each completed 12 deals. Plug and Play Ventures took third with 10 deals.
Greycroft topped the list for total investment value, investing US$699 million over nine transactions in 2022. OMERS Ventures was second with US$592 million, including a share of Q4’s only mega-round, for Clearcover. Allianz X took third with US$565 million across three deals.
The top recipient countries for insurtech investment in 2022 were the US, the UK, Germany, France, India, Israel and Australia, all of which topped US$200 million, Gallagher Re reported. At $4 billion, US companies received 35% more investment than the next six countries combined.
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