Global insurtech funding drops 54% amid COVID-19; re/insurers are holding back: WTW

Global insurtech funding declined by over 50 percent in the first quarter of 2020 due to the impact of COVID-19 pandemic with hardly any 'mega deals' taking place thus far, according to Willis Towers Watson.

The first three months of 2020 witnessed the highest number of investment rounds by transactional volume, with 96 deals attracting a total of $912 million.

Overall total funding was down by 54 percent, however, reflecting in part far fewer ‘mega-deals’ ($100 million-plus deals) taking place in the year so far.

“This has been a particularly interesting quarter for global InsurTech. It is clear that COVID-19 has had a material impact on later-stage investments, and (re)insurers are holding back," said Andrew Johnston, global head of insurtech at Willis Re. "Despite the very large percentage drop this quarter when compared with the last, we are still seeing a huge amount of activity in early-stage funding rounds, across a very large number of deals.

Willis noted the quarter included no unicorn making rounds and only observed one mega-round — the $100 million Series D issue by PolicyGenius. In 2019, multiple unicorn-making rounds supported eight out of the ten insurtech firms valued at over a billion $.

"The relative downturn of (re)insurer participation in this round would explain why we have seen fewer megadeals, affecting the overall amount raised significantly, which is not surprising as (re)insurers increasingly participate in later stages," Johnston explained. "Again, COVID-19 is a likely culprit for less engagement from industry capital as (re)insurers focus their attention on other, perhaps more pressing issues.”

Nearly 54 percent of the deals were recorded in the US, and 10 percent in the UK.

The deal flow in Asia declined, but the Czech Republic recorded its first-ever public insurtech deal.

Seed and Series A financing was down 9 percent from the previous quarter, at $223 million, but early-stage deal count rose three percentage points to 51 percent of all deals; as a percentage of all funding, early-stage deal investment was up 12 percentage points.

The report found that insurtechs focused on property and casualty (P&C) insurance increased their share of total funding to 83 percent, the largest gap with life and health funding since Q3 2016.

Meanwhile, B2B-focused companies accounted for 55 percent of recorded deals in Q1 2020, a 121 percent increase from Q4 2019. The value of strategic investments by re/insurers fell 8 percent from Q4 2019 and 43 percent from its highest point, reached in Q3 2019.