First-quarter InsurTech funding reaches record high of $2.55bn: Willis Re

InsurTech boomed over the first quarter of 2021, achieving the highest levels of funding and deal volume ever recorded, according to the latest Willis Re InsurTech briefing.

Over the period, InsurTech companies raised $2.55bn across 146 deals – the highest tallies ever for either category, Willis Re said. Funding is up by 22% quarter on quarter, breaking the previous record set in the third quarter of last year of around $2.54bn.

The first-quarter funding tally is greater than that for the whole of 2017 and nearly matches the figure for the whole of 2015. It also marks a significant recovery compared with the first quarter of last year, which recorded around $912mn in total funding, as uncertainty surrounding the Covid-19 pandemic reduced investor appetite.

Over the last 12 months, however, Covid-19 has also had a beneficial effect on InsurTech, as it has ushered in an “era of acceptance and openness”, according to global head of Willis Re InsurTech Andrew Johnston. He said the pandemic had lent weight to the notion that adopting technology could bring myriad benefits, such as improving risk-to-capital matching and customer experience and cutting operating costs.

He acknowledged the technology being embraced was not necessarily new but said there was now a “widespread willingness to engage and adopt” and that this sentiment was growing at an “unprecedented rate”. According to Willis Re’s report, most deals were in the P&C space, with around 107 deals recorded in the quarter. The remaining 39 were attributed to the life and health sector.

P&C deals accounted for around 69% of available funding, which went mostly to B2B or distribution-focused companies.

Over Q1, eight mega-rounds were recorded, with seven going to US companies, a fourfold increase compared with the prior quarter. These mega-rounds accounted for around 44% of total funding and included $250mn for Next Insurance, $175mn for Coalition and $150mn for Zego.

Most of the companies raising these mega-rounds were also raising Series C rounds, which is slightly atypical, as they are usually Series D or later. bJohnston said this could reflect growing funding requirements earlier, “froth in the markets” or a mixture of the two. Late-stage funding, involving deals of more than $40mn, accounted for 18 deals, up from the previous high of 12 in the previous quarter.

Nearly three-quarters of these deals were recorded in the US, with the rest spread across China, Germany, India, Israel and the UK. Early-stage deals increased in the first quarter to account for around 60% of funding, up by around 13 percentage points compared with the prior quarter, whilst mid-stage deals fell by 16 percentage points to 13% of total funding.

The US remained a dominant player in the InsurTech space, with deal share growing by 3 percentage points to 48%, but the report noted that US activity was still not at pre-pandemic levels. According to the report, this quarter was one of the most geographically diverse on record, with 26 countries represented, including Bangladesh, Estonia, Brazil, Nigeria and U.A.E.

The report said there were around 26 reinsurer partnerships in the first quarter, on a par with the prior quarter.

Source: Insurance Insider