Investment in the insurtech space in the second-quarter of 2022 increased by 8.3% from the opening quarter of the year to $2.41 billion, as a rise in the average deal size masked a decline in the overall number of deals, according to reinsurance broker Gallagher Re’s latest Global Insurtech Report.
Despite the rise from Q1, insurtech investment in Q2 2022 remains approximately 50% below the record level seen in Q2 2021, a year which broke records for investment in the sector.
When compared with Q1 2022, the average deal size increased by more than 18% in Q2 2022 to $22.1 million, although the number of deals fell by almost 8% from 143 to 132 in the second-quarter.
In terms of property and casualty (P&C) investments, the report shows that Q2 saw 92 deals worth a total of $1.49 billion. However, Gallagher Re says that P&C deal flow is down by over 13%, although total investment is up almost 6%, with the average P&C deal size at $20.73 million.
Additionally, the quarter saw 40 life and health (L&H) insurtech investments totalling $918 million, an increase of more than 12% on Q1 2022.
“Global markets have struggled since the beginning of the year, with even the most robust stock valuations taking a beating. InsurTechs which are set to deliver growth and profitability over the long-term now present confident investors with an excellent opportunity to diversify their portfolios. A number of them will undoubtedly change the face of our industry, or parts of it, and in some cases are already doing so. As markets begin to recover, those InsurTechs should rise to the surface with the utmost buoyancy,” said Dr. Andrew Johnston, Global Head of InsurTech at Gallagher Re.
“The recent downgrade of company values could lead to M&A and divestitures that were unlikely six months ago. It has caused some InsurTechs to coalesce, and thrown cold water over many other InsurTechs that previously considered themselves special or unique. In the wake of value realisation, certain InsurTechs should offload, and certain investors – even certain InsurTechs – should acquire. For both sides of the trade, this moment could be seen as an enormous opportunity,” he added.
According to the data, UK ventures witnessed a large increase in the period, representing 12.1% of all global deals in Q2. Gallagher Re also states that an about-average 45.5% of deals benefitted insurtechs based in the U.S. in the quarter.
Of the second-quarter investments, re/insurance companies made 28, which is actually five fewer than seen in the previous quarter. The report finds that Series A investments made up almost 33% of re/insurer deals in the period, which is the highest since Q2 2020, driven by strategic investments announced as 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 assist in commercialising their products to offer our clients differentiating products. Looking at the property catastrophe space, our clients look to us to share a view on how different vendor models work and compare, in order to make informed decisions on their property portfolio management. 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 comprehensive report also features a case study of insurtechs Hedvig, EasySend, Descartes Underwriting, and Apollo Agriculture, and also examines Paris-based Alan, which it describes as the deal of the quarter.
Brian Ingle, President of Global Analytics at Gallagher Re, added: “We are seeing interest move beyond understanding the hazard and financial model operations into areas like stress-testing climate scenarios, and verifying that the data feeding models is a most-accurate representation of exposure characteristics. Each task in this process can be enhanced with specific partnerships, and thinking about the end goal of writing a more profitable portfolio. We are experts in divining the systemic risk that our clients should look to trade, and since that risk is evolving, we are constantly on the lookout for new tools and partners.”