InsurTech fundraising rebounds as US$1.5+ billion invested in Q2 2020; four more ‘mega-rounds’ completed

Rhea-AI Summary

In Q2 2020, InsurTech firms raised $1.56 billion, marking a 71% increase from Q1 amid a global slow down due to COVID-19. The number of deals reached 74, a 23% decrease from the previous quarter, with a notable shift towards later-stage investments. The P&C sector dominated funding at 68%, while L&H investments rose to 32%. New insurance partnerships hit a record 34 deals. Experts caution that lingering economic effects from the pandemic may impact future InsurTech activities, highlighting potential challenges for highly leveraged firms.

Positive

• InsurTech firms raised $1.56 billion in Q2 2020, a significant 71% increase from Q1.
• Later-stage investments, including four mega-rounds over $100 million, drove the growth.
• The share of L&H sector investments rose by 17 points, indicating increasing interest in telehealth technologies.

Negative

• Total deal count decreased by 23% from Q1, indicating a slowdown in market activity.
• Caution is advised regarding sustainability of investment trends, especially for highly leveraged InsurTechs.
• The true economic impact of COVID-19 is expected to unfold in 2021 and 2022, potentially limiting future investments.

LONDON, July 28, 2020 (GLOBE NEWSWIRE) -- Following the COVID-19-induced slowdown in global InsurTech investment during the first months of 2020, $1.56 billion was raised by InsurTech firms in Q2. The total, up 71% over Q1, was driven in part by later-stage investments, including four ‘mega-rounds’ in excess of US$100 million, according to the new Quarterly InsurTech Briefing from Willis Towers Watson, a leading global advisory, broking and solutions company (NASDAQ: WLTW).

At 74, deal count was down 23% from Q1, but many individual rounds were larger as investors continued to turn away from Seed and Angel deals in favour of support for more mature ventures. P&C sector investments predominated, accounting for 68% of funding, but the share of L&H sector investments was up 17 points to 32%, as the pandemic crisis continues to compound the value of technology, and particularly telehealth, in the segment. Also notable was the initial public offering of Lemonade and the acquisition of two incumbent insurance companies by InsurTechs, Hippo and Buckle.

Deals were struck in a record-breaking 25 countries, including newcomers such as Taiwan, Croatia, and Hungary. Seed and Series A financing hit a record low, at just 42% of deals. Series A deals were flat, but Series C deals accounted for 11% of deals, up from 6% the previous quarter. Distribution-focused start-ups saw an 11-point rise in deal share, while B2B companies reduced their share by nine points. New (re)insurer partnerships reached a record high of 34 deals, up four from Q1 2020.

Dr Andrew Johnston, global head of InsurTech at Willis Re, said: “While InsurTech investment clearly rebounded in Q2, and the trend towards greater commitments to later-stage fundraisings continues, we should be cautious and not read too much into the general state of the global InsurTech market based on this quarter alone. In the short term, investment confidence will test the status quo, especially for highly leveraged InsurTechs. Similarly, certain risks and their associated vectors have changed fundamentally and so the impact of that is yet to be truly felt. It is quite possible that we will observe a general slowing down of InsurTech activity as a result.

In the medium term, changing risk classes may be better understood alongside rising consumer optimism, but the true economic impact of COVID-19 probably won’t unfold until 2021 and 2022. This will undoubtedly impact many (re)insurers’ appetite to invest in or deploy technology. Survival may be a challenge for some InsurTechs, especially if their use-case has been lost forever due to underlying societal change following the lockdown. Equally, such changes will create opportunities for others. If the funding gap between Seed and later stages continues to widen then many InsurTechs will struggle to acquire the funds required for maturing growth”.

The latest Briefing, which focuses on InsurTech for property risks, opens with a detailed exploration of the segment. The Briefing includes case studies of the property-focused InsurTechs Openly, a managing general agent writing homeowners and landlord products; handdii, a digital platform for property insurance claims; Arturo, which delivers structured data observations and predictions for property insurers; Hometree, which provides home cover contracts to insureds; and Insurdata, which offers high-resolution exposure data in real time.

The issue also explores Structure Insurance Score, developed by Willis Towers Watson and e2Value to capture data used in determining replacement costs; the US$123 million fundraising by the title insurance and escrow service States Title, which took its valuation to US$623 million; and the acquisition by homeowners insurer Hippo of Spinnaker Insurance Company, which gives the unicorn InsurTech insurance licences in 50 U.S. states.

The Briefing includes discussions with Kyle Beatty, an InsurTech investor and principal at American Family Ventures; and also a discussion with the founders of TypTap, a B2C InsurTech focused on homeowners and particularly flood risk. The issue also carries an article by Desmond Carroll, Executive Vice President and Head of Catastrophe R&D, Willis Re North America, on technology for property catastrophe insurance.

Carroll said: “The chief technologies for catastrophe risk modelling have evolved little in terms of process since the inception of the science, despite much-expanded use of model outputs. That is set to change. The combination of machine learning and big data holds real potential to disrupt traditional cat modelling methodologies, for example through the mass analysis of satellite data to better understand catastrophic weather events. That’s just one way that InsurTech will ultimately revolutionise the property branch of the risk transfer business.”

View the full report here.

About Willis Re

One of the world's leading reinsurance brokers, Willis Re is known for its world-class analytics capabilities, which it combines with its reinsurance expertise in a seamless, integrated offering that can help clients increase the value of their businesses. Willis Re serves the risk management and risk transfer needs of a diverse, global client base that includes all of the world's top insurance and reinsurance carriers as well as national catastrophe schemes in many countries around the world. The broker's global team of experts offers services and advice that can help clients make better reinsurance decisions and negotiate optimum terms. For more information, visit willistowerswatson.com/Solutions/reinsurance

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimise benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com

Media contact

Haggie Partners: +44 20 7562 4444 | willisre@haggie.co.uk

FAQ

What was the total amount raised by InsurTech firms in Q2 2020?

InsurTech firms raised a total of $1.56 billion in Q2 2020.

How much did InsurTech investment increase from Q1 to Q2 2020?

InsurTech investment increased by 71% from Q1 to Q2 2020.

What percentage of funding in Q2 2020 was for P&C sector investments?

P&C sector investments accounted for 68% of the funding in Q2 2020.

What concerns did experts express about the InsurTech market?

Experts expressed concerns about potential challenges for highly leveraged InsurTechs and the sustainability of investment trends.

What is the expected timeline for the economic impact of COVID-19 on InsurTechs?

The true economic impact of COVID-19 on InsurTechs is expected to unfold in 2021 and 2022.