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Insurtech Fundraising Rises in Q2 with $1.6 Billion Invested

Following the COVID-19-induced slowdown in global insurtech investment during the first months of 2020, insurtech firms raised $1.56 billion during the second quarter.

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 broker Willis Towers Watson.

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 favor of support for more mature ventures, said WTW.

Property/casualty insurance sector investments predominated, accounting for 68% of funding, but the share of life/health sector investments was up 17 points to 32%, as the pandemic crisis continues to compound the value of technology, particularly telehealth, in the segment.

Also notable during the quarter 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.

“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,” commented Dr. Andrew Johnston, global head of Insurtech at Willis Re.

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,” he added.

“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,” said Johnston.

“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,” he continued. “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.”

In its first quarter report, WTW found that while finding fell 54%, insurtech companies still raised US$912 million, with most of the funding completed at the beginning of the quarter.

Source: Willis Towers Watson

Other noteworthy insurtech funding deals in the second quarter were:

• Home Insurance Insurtech Hippo Raises $150M as It Readies for IPO in 2021
  Hippo Enterprises., hot on the heels of rival Lemonade Inc. going public, closed a $150 million financing round. The Palo Alto, California-based startup is valued in the investment at $1.5 billion. Hippo is preparing for a potential initial public offering, said Chief Executive Officer Assaf Wand.

• Workers’ Compensation Insurtech Pie Raises $127 Million With Plan to Acquire Carriers
  Pie Insurance closed on $127 million in new financing and capital commitments. The company said the new financing includes $27 million to support the continued expansion of its offering to small business owners. The additional $100 million equity capital commitment will also support its initiative to form and purchase licensed insurance companies.

• Nationwide Insurance Joins Investors in Planck’s $16 Million Financing Round
  Planck, which deploys artificial intelligence in commercial lines, recently raised $16 million in a Series B venture financing round led by Team8 Capital. Nationwide Insurance participated along with existing investors including Viola FinTech, Arbor Ventures and Eight Roads. Nationwide and HDI Group also joined on as strategic investors.