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Insurtech Funding Stable Through ‘Inflection Point’ Q3: Gallagher Re

Insurtech Funding Stable Through ‘Inflection Point’ Q3: Gallagher Re

Insurtech Funding Stable Through ‘Inflection Point’ Q3: Gallagher Re

Insurtech Funding Stable Through ‘Inflection Point’ Q3: Gallagher Re

According to recent data from re/insurance broker Gallagher Re, $2.35 billion was invested globally in the insurtech sector in Q3 2022, which might be considered a “inflection point” for the industry.

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However, Gallagher Re points out that the headline statistic conceals certain important characteristics, notably a 48.1% increase in early-stage funding, led by the second-highest quarterly number of seed-funding deals ever. The quantity of investment was actually down 2.5% from Q2’s total.

In contrast, P&C insurtechs received $1.2 billion in mega-round funding through investments of $100 million or more, which is twice as much as in Q2.

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Despite the mega-rounds, the average deal size fell 7.6% to $20.42 million in Q3, reflecting the volume of early-stage funding, while the total deal count was up 6.1% to 140 deals.

Insurtech Funding Stable Through ‘Inflection Point’ Q3: Gallagher Re

Gallagher Re observes that this effect was most pronounced in L&H funding, which slid from $917.85 million in Q2 to $579.19 million in Q3, with deal size slumping 38.6% to $15.24 million in Q3, averaging over 51 deals.

Total funding of P&C InsurTechs was up 18.8% to $1.77 billion, with re/insurers making 24 investments, pushing the market towards a three-year high for strategic funding in 2022.

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“Third-quarter investments this year were made at a particular inflection point for the global InsurTech sector,” said Andrew Johnston, Global Head of InsurTech at Gallagher Re.

“Pressure is mounting on those companies that sold the idea of endless growth to secure funds. The extent to which some founders truly believed they could grow their businesses (to the degree they were indicating) in our industry will always be a topic for discussion, but it seems very clear now that the era of rushed growth for growth’s sake at the expense of profitability is coming to a close,” Johnston continued.

Insurtech Funding Stable Through ‘Inflection Point’ Q3: Gallagher Re

“Hubristic rhetoric around ‘disruption’ is declining in sequence with the growing realization that profitable carriers (no matter how ‘outdated’), intermediaries, and traditional markets are to be supported, not displaced,” he added.

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“Genuine disruption has been extremely limited despite almost $50 billion of global InsurTech investment. Success has typically come only in areas where incumbents have been embraced and respected. Meanwhile, there’s increasing pressure on risk-originating InsurTechs operating as MGAs to begin partaking in the process of retaining the risk, which in practice makes them more like incumbents.”


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