The InsurTech industry has bounced back strongly in the first quarter of 2021, with global investments reaching $1.39 billion, according to the latest Global InsurTech Report from Gallagher Re. This marks a 37.6% increase from the previous quarter’s lowest total since Q1 2020, indicating a strong recovery for the industry. The report also highlights some interesting trends in the industry, including steady deal counts, increased average deal sizes, and more.
Steady deal count, but average deal size increases
Despite the pandemic’s impact on the economy, the deal count for InsurTech funding remained steady, suggesting that investors remain optimistic about the industry’s future. However, what is particularly positive news is that the average deal size increased by 25.3%, indicating more significant commitments from investors.
Mega-Round Funding Accounts for Only 12.9% of Total
While mega-round funding (investment rounds of $100 million or more) can often skew the overall funding numbers for an industry, the report shows that mega-round funding for InsurTech companies accounted for only 12.9% of the total in Q1 2021. This is the lowest percentage since the dip experienced in Q1 2020.
P&C insurtech funding drives increase in quarterly investment
The report found that Property and Casualty (P&C) InsurTech funding was the driving force behind the increase in quarterly investment, surging by more than 53% to $967.89 million in Q1 2021. This increase is likely due to the ongoing demand for innovative solutions to the challenges facing the insurance industry, such as automation and improved underwriting capabilities.
L&H Fundraising also grows
Life and Health (L&H) fundraising also grew, rising 9.6% to $420.73 million. This increase occurred despite early-stage L&H funding seeing a decline of 44.3% relative to the previous quarter. However, the average early-stage deal was up by 28% to $8.31 million. This suggests that while there may be fewer early-stage deals, the ones that do happen are larger and more significant.
Potential return to pre-pandemic levels of InsurTech funding
The latest funding totals suggest that 2023 may mark a return to the more ‘normal’ levels of gently rising InsurTech funding that were experienced before the pandemic. According to Simon Johnston, Head of InsurTech at Gallagher, “Funding is back to pre-pandemic levels, and the sector is set to prove its worth, with investors convinced of the long-term potential.”
Founders are focusing on long-term sustainability and growth
As the pandemic continues to disrupt industries worldwide, founders of InsurTech startups are now thinking about long-term sustainability and growth. The report suggests that founders are realizing their businesses will need to “pull the plow” themselves, relying on their capabilities and revenues. This is a positive sign for the industry, indicating a focus on sustainability rather than short-term gains.
The InsurTech industry has proven its resilience and adaptability over the past year, with Q1 2021 marking a strong rebound in funding and continued optimism from investors. The report suggests a potential return to pre-pandemic levels of funding, and founders are focusing on long-term sustainability and growth. This is a positive outlook for the industry, with InsurTech startups well-positioned to drive innovation and change in the insurance sector.
