The UK was listed as one of seven countries for top insurtech investment in 2022 which was $200m (£162.6m) for this country
Quarterly insurtech funding for Q4 2022 dropped to its lowest level since Q1 2020, plummetting by 57% quarter-on-quarter – this equated to a $1.01bn (£813m) fall, according to Gallagher Re’s latest report.
The Global Insurtech Report, published last week (2 February 2023), added that this was the the first instance of a year-on-year decline in investment since 2016.
These figures followed a year of macro-realism for individual insurtechs and micro-hardship for investors in the sector, the report noted.
On the flipside, the UK was listed as one of the top seven recipient countries for insurtech investment in 2022 alongside the US, Germany, France, India, Israel and Australia – the top seven all topped $200m (£162.6m) total insurtech funding across last year.
US companies, however, received 35% more investment than the next six countries combined at $4bn (£3.25bn).
Andrew Johnston, global head of insurtech at Gallagher Re, said: “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.
“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. Meanwhile, venture capitalists are focused on profitability and well-understood key performance indicators.”
Refocusing on the ‘real’ prize
Early-stage funding declined less than total funding, dropping 25.1% quarter-on-quarter to $408m (£332m) in Q4 – this was driven by a 51.3% drop in early-stage property and casualty (P&C) funding.
The quantity of insurtech deals also dropped to 106 in Q4 2022, the lowest number of deals since Q4 2020.
In addition to this, mega-round funding fell 89.7% quarter-on-quarter, from $1.48bn (£1.2bn) in Q3 to $153m (£124.3m) in Q4. 2022 saw $6.51bn (£5.29bn) less in mega-round funding than the previous year, which was a 66.7% year-on-year drop.
Similarly, annual funding for insurtech halved between 2021 and 2022, decreasing 49.5% year-on-year from $15.80bn (£12.84bn) in 2021 to $7.98bn (£6.48bn) in 2022.
On a more positive note, a small number of individual businesses have done remarkably well.
Johnston, added: “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.”
- Insurance Times has converted dollar amounts into pounds using an exchange rate of $1.23 = £1, which was correct as of 1 February 2023.