The insurtech sector has seen record-breaking investor appetite in the third quarter of 2020, with US$2.5 billion raised across 104 deals – up 63% and 41% respectively over the prior quarter – according to a study by Willis Towers Watson.
In its Quarterly InsurTech Briefing, the global broking giant noted that while the quarter’s deals included two US$500 million rounds, the mid-tier funding gap for firms seeking investments in the US$20 million to US$50 million range has widened.
The quarter also saw six mega-rounds of US$100 million or more, which accounted for over two-thirds of total funding. These were Bright Health, Ki, Next Insurance, Waterdrop, Hippo, and PolicyBazaar. Early-stage deal share increased to 57%, up 15 points to pre-COVID-19 levels. This was attributed to P&C start-ups.
Furthermore, over half of insurtechs with a Q3 Series A round were raising capital for the first time and raised an average of US$10.9 million. Insurtech companies seeking mid-tier Series B and C investments, however, saw deal share shrink by almost nine percentage points. The smaller rounds were dominated by non-industry investors such as venture capital and private equity firms, while re/insurers were more likely to invest in the larger deals.
Most of the deals remained in the P&C sector, but the L&H investments increased by three points to 30%. According to Willis Towers Watson, this was driven by a disproportionate amount of L&H funding in the mega-rounds receiving true “growth” capital, with L&H accounting for three of the six deals, and 49% of total mega-round funding for Q3.
“With everyone working from home, never has the true value of technology been more real and manifest in our industry,” said Dr Andre Johnston, global head of insurtech, Willis Re. “But most re/insurers are looking either to accelerate, conclude, or temporarily slow down their ancillary technological endeavours and focus instead on ensuring their core business functions operate efficiently in the new digital, remote environment.
“Consequently, their appetite to support well-established insurtechs is much greater than for those who still have things to prove. That means the lifeblood of budding insurtechs who rely on Series B and Series C rounds to scale up has, relatively speaking, disappeared.”
The report also included case studies on several insurtechs across different global regions. These included GWTInsight (UK), which develops data analytics for commercial property; Next Insurance (US), which insures small businesses; Anapi (Singapore), which has a digital platform to support start-ups in Asia; Foresight (US), a middle-market workers’ compensation provider; Briza (US/Canada), which develops APIs to support small commercial transactions; eBaoTech (China), a digital insurance solutions provider; and Bold Penguin (US), which operates a commercial insurance exchange.