Investments in the insurtech space in the second quarter of 2022 increased by 8.3% compared to the first quarter of the year to reach $2.41 billion, an increase in the average deal size masking a drop in the total number transactions, according to reinsurance broker Gallagher. The latest global Insurtech report from Re.
Despite the increase from the first quarter, insurtech investment in the second quarter of 2022 remains around 50% below the record level recorded in the second quarter of 2021, a year that broke investment records in the sector.
Compared to the first quarter of 2022, the average deal size increased by more than 18% in the second quarter of 2022 to reach $22.1 million, although the number of transactions decreased by almost 8%, from 143 to 132 in the second trimester.
In terms of P&C investments, the report shows that the second quarter saw 92 deals with a total value of $1.49 billion. However, Gallagher Re reports that P&C deal flow decreased by more than 13%, although total investment increased by almost 6%, with the average P&C deal size being $20.73 million.
Additionally, the quarter saw 40 life and health insurance (L&H) technology investments totaling $918 million, an increase of more than 12% from the first quarter of 2022.
“Global markets have struggled since the start of the year, even the most robust stock market valuations have been beaten. InsurTechs, which are expected to generate long-term growth and profitability, now offer confident investors an excellent opportunity to diversify their portfolios. A number of them will no doubt change the face of our industry, or parts of it, and in some cases are already doing so. As markets begin to recover , these InsurTechs should come to the surface with the greatest momentum,” said Dr Andrew Johnston, Global Head of InsurTech at Gallagher Re.
“The recent downgrade in corporate values could lead to mergers and acquisitions and divestitures that were unlikely six months ago. This has caused some InsurTechs to merge and threw cold water on many other InsurTechs that previously saw themselves as special or unique. In the wake of valuation, some InsurTechs are expected to offload, and some investors – and even some InsurTechs – are expected to acquire. For both sides of the trade, this moment could be seen as a huge opportunity,” he added.
According to the data, UK businesses saw a surge over the period, accounting for 12.1% of all global deals in the second quarter. Gallagher Re also says about 45.5% of deals on average went to US-based insurtechs during the quarter.
Among investments in the second quarter, re/insurance companies made 28, ie five less than in the previous quarter. The report reveals that Series A investments accounted for nearly 33% of transactions with reinsurers during the period, which is the highest since the second quarter of 2020, driven by announced strategic investments in the form of partnerships.
Printhan Sothinathan, Chief Executive Officer (CEO) of Gallagher Re’s Global Analytics unit, said: “When we see InsurTechs taking unique approaches to leveraging new and emerging data with advanced analytics, we are helping to market their products to offer our customers differentiating products. When it comes to the real estate catastrophe space, our clients look to us to share their perspective on how different vendor models work and compare, to help them make informed decisions about managing their real estate portfolio. We believe in a future where individual data components will vary in usefulness and/or relevance over time. Meanwhile, InsurTech is putting increased pressure on the industry to continue to evolve and innovate.
The full report also features a case study on insurtechs Hedvig, EasySend, Descartes Underwriting and Apollo Agriculture, and also looks at Paris-based Alan, who he describes as the deal of the quarter.
Brian Ingle, President of Global Analytics at Gallagher Re, added: “We are seeing interest go beyond understanding the risks and operations of the financial model into areas such as stress test climate scenarios and verification that data feed models are the most accurate representation of exposure characteristics. Each task in this process can be improved with specific partnerships and thinking about the end goal of writing a more profitable portfolio. We are experts at guessing the systemic risk our clients should be looking to trade, and as that risk evolves, we are constantly on the lookout for new tools and partners.