Re/insurance broker Willis Towers Watson (WTW) has reported that insurtech firms raised a total of $2.5 billion across 104 deals during the third quarter of 2020.

The total value raised was 63% higher than in the previous quarter, while the number of deals increased by 41%, according to the new Quarterly Insurtech Briefing.

WTW observed solid investor appetite for both new and mature opportunities in the insurtech sector, although the mid-tier funding gap for firms seeking investments in the $20 million to $50 million range widened.

Six large rounds of $100 million or more accounted for more than two thirds of total funding, including Bright Health, Ki, Next Insurance, Waterdrop, Hippo, and PolicyBazaar.

But early-stage deal share grew to 57%, bolstered by P&C start-ups and more than half of insurtechs with a Q3 Series A round were raising capital for the first time, raising on average $10.9 million.

InsurTech companies seeking mid-tier Series B and C investments, however, saw deal share shrink by almost 9 percentage points.

Overall, non-industry investors including venture capital and private equity predominated in the smaller rounds, and re/insurers in the larger end.

WTW also found that P&C sector investments predominated in Q3, but the share of L&H sector investments still rose 3 points to 30%.

This was driven by a disproportionate amount of L&H funding in the larger rounds, accounting for three of the six biggest deals and 49% of funding.

“With everyone working from home, never has the true value of technology been more real and manifest in our industry,” said Andrew Johnston, global head of InsurTech at Willis Re.

“But most re/insurers are looking either to accelerate, conclude, or temporarily slow down their ancillary technological endeavours and focus instead on ensuring their core business functions operate efficiently in the new digital, remote environment,” Johnston continued.

“Consequently, their appetite to support well-established InsurTechs is much greater than for those who still have things to prove. That means the lifeblood of budding InsurTechs who rely on Series B and Series C rounds to scale up has, relatively speaking, disappeared.”

Richard Clarkson, head of London market consulting at WTW, also commented: “Algorithmic-follow disruptors – those underwriting entities that use technology and analytics to take a share of business offered under the terms and rates of a lead underwriter – are set to claim to a bigger slice of the insurance market, especially as the evolving Lloyd’s business model shifts to make it easier for them to do so.”

“Many of the component parts required to create systems to implement this model have actually been around for a while. This will make trading faster and more responsive, and open new attractive avenues for alternative capital.”

Source: Reinsurance News