Mega-deal drought sends insurtech funding to 4-year low
Gallagher Re reports that global insurtech funding slipped 17.3% during Q1 2024.
First-quarter insurtech funding fell to its lowest point in four years after the industry failed to notch a deal exceeding $100 million for the first time since 2017, according to data compiled by Gallagher Re.
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The report shows global insurtech funding slipped 17.3% during the period, falling from $1.103 billion the previous quarter to $912.3 million. Global insurtech funding has not dipped below the $1 billion marker for a quarter since 2020.
Despite continued interest and activity in the market, the average check size on each deal is decreasing, Gallagher Re Global Head Dr. Andrew Johnston said in the report. “Consequently, the average insurtech deal size fell sharply by 30.6% quarter on quarter,” he added.
While the average deal dropped beneath $10 million, the number of first-quarter transactions jumped to 107 after posting just 100 deals for the previous period. Also during the first quarter, early-stage funding rose 26.5%, according to the Gallagher Re report.
“Since the InsurTech investment peak in 2021, we have continued to see a funding reset,” Johnston said.
“With activity up but average deal size down, investors are becoming more democratic in their funding allocations and spreading capital more evenly among companies,” he added. “This has resulted in a more sustainable InsurTech market.”
The report also showed AI-centered insurtechs experienced a higher average deal size at $10.5 million per deal while accounting for 28% of all first-quarter transactions. Of the 30 AI-centered deals included in this study, 16 went to early-stage companies at an average of $6.1 million, which is over $2 million larger than insurtech not centered on AI.
“Whatever the cost, the industry has got to remain relevant, and the adoption of technology (through InsurTech or other sources) is not a nice to have. It is a necessity,” Johnston said in the report.
“Existing commercial AIs come to life when they have been trained on a data set, or a data model, and as a result they generally have a business focus embedded in the nuts and bolts of the technology itself,” he added. “InsurTechs that leverage AI have a huge opportunity to help our industry better understand this tricky issue.”
Meanwhile, the first quarter saw Property & Casualty insurtech funding drop 22.5% on just six quarter deals. Life & Health insurtech funding also backpedaled quarter on quarter, falling 4.7% despite a deal increase by 54.2% over the same period.
(Re)insurers secured 37 private technology investments during the first quarter after peaking at 41 the final quarter of 2023. Despite the quarterly dip, first quarter tallies were up by 30 year over year, the report stated.
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