But, sector expert has concerns that ‘insurtech’ label could constrict future investment if used too broadly or to encompass widely varied business models

Insurtech expert Andrew Johnston didn’t initially set out to work in the insurance industry. On returning to the UK after fulfilling a Cambodia-based genocide lawyer role for the United Nations in 2016, Johnston’s father suggested he set his cap at a career in insurance, to which Johnston originally replied: “Absolutely not”.

However, Johnston’s father Bill - who is a group director at insurance agency Hampden Group and friend of Willis Re managing director John Cavanagh - saw his son change his mind regarding his career plans, with Johnston subsequently joining Willis Towers Watson (WTW) in June 2016 as a research analyst.

In January 2017, Johnston was appointed Willis Re’s global head of insurtech. Following global broker Arthur J Gallagher and Co buying WTW’s treaty reinsurance brokerage operations in December 2021, Johnston now fulfills this role at Gallagher Re - the brand name of the purchased WTW portfolio combined with Gallagher’s existing reinsurance operations.

Speaking on his career journey so far, Johnston tells Insurance Times: “When I joined Willis Re, Cavanagh asked me what I wanted to do.”

Because Johnston had a research background, Cavanagh suggested that he led emerging risk research projects. 

Johnston continues: “I initially began researching cyber, fintech and the sharing economy. Then, insurtech came into my purview in a very big way in the summer of 2016 as a number of our traditional clients were asking us about it and what it might mean for them.

”At that time, we didn’t really have a disciplined response. So, in January 2017, I launched [Willis Re’s insurtech division] with the expressed view of researching the sector and sharing these insights with our clients.”

The rest, as they say, is history. Johnston’s department now helps insurtechs to enter the insurance industry, supporting them to find capacity and investments.

On 27 October 2021, WTW published its latest Quarterly Insurtech Briefing report for Q3 2021, themed around the “future of risk” - this was designed to build on Q2’s report, which centred around the “future of insurance”. 

Johnston’s key takeaway following this work is that the insurtech sector is still on an upwards trajectory, where capital continues to come in.

Future of risk

Johnston leads the Quarterly Insurtech Briefing project. Speaking on Q3’s report, he says: “I chose to focus on two areas I thought were most pertinent in terms of change – weather and climate changes and cyber.

”These two areas just keep evolving at lightning quick pace, [so much so that it] warranted a thorough review. They are both truly systemic issues - there is no part of the globe, business or demographic that is not susceptible. The cyber opportunity is huge as we increasingly digitise and rely on technology.”

In terms of investment trends, Johnston says support for cyber insurance focused businesses is still notable - as highlighted by two of the three biggest funding deals completed in the third quarter of 2021.

This includes Coalition, which raised a $205m (£155m) in a series E round, and At-Bay, which raised $185m (£140m) in a series D funding round.

“The other trend is that geographically, we are still seeing a lot of international participation, which is fantastic,” he adds.

”For this quarter, there were many big deals done and series A deals done, but series B and C has dropped.” 

Series B and C funding rounds, which typically take place when the company in question has accomplished certain milestones in developing its business past the initial startup stage, holds the most risk in terms of capital, Johnston explains.

Therefore, if series B and C rounds continue to fall, it could point to a digression in investment. Johnston notes, however, that it is still early days for this possible trend.

The latest insurtech briefing profiles eight companies, including flood modelling firm Previsico, which secured £1.75m of funding in September 2021. “I find it a real honour to shine a spotlight on companies that might otherwise get overlooked,” Johnston says.

Johnston predicts that satellites and the Internet of Things will be the next big trends to hit the insurtech market.

No capital shortage, but…

Q3 2021 saw insurtech investment surpass $10.5bn (£7bn) for the first time in any one year period, which Johnston deems a notable milestone.

He predicts this figure will increase further during Q4. “We are already looking at 2018 and [2019’s] combined [insurtech investment] being surpassed. We could presumably throw 2017 in by the end of the year,” he says.

Meanwhile, 2021’s Q2 held the largest quarterly insurtech investment on record, reaching $4.8bn (£3.5bn).

“If you look at the overall annual funding trajectory, Q3 is in line with where Q1 was going. It’s just that Q2 was so big, that Q3 looks slightly underwhelming, yet it’s the second largest quarter we have ever seen, which is huge,” he adds.

Although this is positive for the insurtech sector, Johnston says: “There are so many companies that have adopted this label ‘insurtech’, but because of a slightly different business model, they might not be attracting the same kind of valuations and capital as others.

“If this does reach a tipping point where people stop wanting to invest in insurtechs, have this handful of companies ruined it for everybody?”

This is a concern for Johnston - he does not want technology to be seen as an issue that does not warrant a major review of investment just because a handful of companies were overvalued.

The insurance industry has also seen many non-traditional investors come in to the sector - Johnston says that currently, there is no shortage of capital or deals.

Johnston continues: “While there seems to be a lot of cash coming into insurtechs, much of it is highly concentrated to just a handful of companies, so the headlines may be of interest, but it’s not telling you much. There’s not this ready access to capital.”