Global investment in insurance technology (insurtech) start-ups totalled $10.5 billion in the first nine months of 2021, a record high level for the period, Willis Towers Watson said in its Quarterly InsurTech Briefing on Wednesday.
With three months left to go, 2021 is now only $12 million short of the total invested into insurtechs globally in 2018 and 2019 combined.
The report total estimated that the total deal count of 421 recorded within ten nine-month period is also an annual record.
The latest quarter saw 113 deals yield more than $3.1 billion in investment, a 23 per cent increase over the third quarter of 2020. It was the second-largest funding quarter on record.
The report also found that deal numbers were up only 9 per cent year-on-year, but the number of mega-rounds of $100+ million reached 11 and accounted for more than half of total funding (down from nearly 70 per cent in Q2, 2021, a quarter that broke nearly every record). Two of the three largest deals were with cyber-related insurtechs: Coalition ($205 million) and At-Bay ($185 million).
“Early-stage startups raised a record-breaking $630 million, as their average deal size grew to nearly $12 million. The share of seed and angel rounds fell dramatically, however, to just 19 per cent, its lowest point since Q2, 2020. Conversely, Series A deal count nearly doubled to 31 per cent of deals,” the report stated.
We can quite clearly see that a significant amount of the capital raised on a quarterly basis is arriving at the doorsteps of the few
Further analysis of the third quarter results further shows that the number of mega-rounds being done per quarter is generally on the rise. At the same time, each individual mega-round deal represents a steadily decreasing percentage of total mega-round activity, and the continued trend is for more than 50 per cent of quarterly funding to be concentrated into just a handful of deals.
The share of U.S.-domiciled investment targets rebounded to nearly 46 per cent during the period, an increase of roughly seven points from the previous quarter, but countries including Indonesia, Sweden, South Africa, Singapore, and the United Arab Emirates saw quarter-on-quarter increases in deal activity.
Funding Train Leaving Many Startups Behind
While investment in global insurtech start-ups continues to rise, not all insurtechs are benefitting. Rather, much of the funding is focused on a relatively few startups.
For example, in the second quarter, more than two-thirds of the total capital raised went into 15 deals, according to Dr. Andrew Johnston, global head of Insurtech at Willis Re.
“The continuing escalation of insurtech funding does not mean that venture and growth capital is available to most or even many insurtechs. The growth of global insurtech investment over the past decade has been significant, but the stark pattern is a concentration of the much for the few,” said Johnston in his comment on the latest Quarterly InsurTech Briefing from Willis Towers Watson.
Johnston said roughly 0.5 per cent of the world’s insurtechs shared $3.3 billion, while $1.5 billion was distributed between another 147. “Funding was zero for the remaining 95%,” he added.
“Generally speaking, deal count and volume continue to rise consistently on a quarterly basis; however, this is possibly where the good news for the majority of insurtech businesses ends. If we scratch away at the figures a little more, we can quite clearly see that a significant amount of the capital raised on a quarterly basis is arriving at the doorsteps of the few,” the briefing says.
