Insurtech funding falls but $7trn market opportunity

Insurtech funding fell to $2.4bn for the first half of 2023, a decline of 45% from the same period in 2022, according to a new report from Dealroom.co, Mundi Ventures, MAPFRE, NN Group, and Generali. Funding in insurtech has fallen to 2018 levels ($1.8bn).

The report, The State of Global Insurtech, reveals that the decline can be found mainly in start-ups with a higher degree of maturity (62% drop with respect to the historical maximum), while the drop in early-stage start-ups stands at 29%. The funding seen in the latter and the increase in the valuation of the main private insurtechs show there is still room for growth in the market, the report notes.

The report states: “Despite representing a $7trn market opportunity, the insurance industry is not able to attract the same level of investment as other sectors, such as food and health. For example, mobility and financial services, even with less opportunity space, have received five and ten times more funding respectively.”

Jeroen Meijers, head of NN Ventures, NN Group, said: “There was a bubble, driven by the low-interest rate environment and search for returns; funding was too easy. In some cases money was raised without a solid customer proposition and business case. Now there has been a reset, and the players who do not have a solid foundation are getting squeezed. In the end it is a good thing and we will end up with a more healthy market. The strong insurtechs can even benefit from this”.

Insurtech has also focused heavily on the casualty insurance market, which has attracted more than 60% of funding in recent years, mostly thanks to cyber insurance and commercial, home, and auto insurance, the report says. The insurance industry continues to be underfunded, especially in areas such as life insurance.

The valuation of insurtech start-ups stands at $281bn, with private companies accounting for a larger percentage of the sector (85%). The US remains the leading region for insurtech investment in 2023, with $1.2bn to date in 2023, although Asia is experiencing the strongest growth (58% in H1 2023 compared to H1 2022).

The report reveals that in Europe, the UK ($178m), Germany ($61m), and France ($34m) attract 80% of the financing. Italy, the Netherlands, and Estonia lead the way in growth of early-stage start-up funding rounds, while Spain has funded more than 40 start-ups, investing $156m since 2020, and has a 0.7-point growth in early-stage venture capital investment.

The report also notes that Latin America saw a partial rebound in funding ($79m in H1 2023), although nowhere close to the peak reached a year ago ($239m in 2022).

Joan Cuscó, global head of Transformation, MAPFRE, said: “Although investment has cooled across the VC landscape in general, ‘good’ start-ups are continuing to close significant fundraising rounds. It should also be noted that insurers still have a lot of room to adopt insurtech solutions that are ready to be deployed at scale. This creates a huge opportunity for insurtech start-ups providing solutions from claims automation and payments to underwriting and pricing. The only way is up – the transformation of the industry is unstoppable.”