Insurtech Funding Falls to Four-Year Low in 2023, Reveals Gallagher Re Report

The insurtech sector faced a significant downturn in 2023, with total funding plummeting to $4.5 billion, the lowest since 2018, according to the latest Global InsurTech Report by Gallagher Re. This represents a stark decrease from the $8.0 billion recorded in 2022, underlining a challenging year for both property & casualty (P&C) and life & health (L&H) segments. P&C insurtech funding fell by 35.4% to $3.4 billion, while L&H insurtechs experienced an even sharper decline of 59.8%, bringing their total to $1.1 billion.

The industry also witnessed a reduction in deal activity, with the number of deals dropping to 422 from 521 the previous year. The decline was observed across both P&C and L&H insurtechs, with deal counts decreasing to 316 and 106, respectively. Furthermore, the average deal size shrank from $18.6 million in 2022 to $13 million in 2023, reflecting a more cautious investment approach amidst economic uncertainties.

Despite the overall downturn, the U.S. insurtech market displayed resilience, recording a 5.5% increase in its share of global deals and leading with 216 transactions. However, mega-round funding experienced a significant drop, with a 70.1% decrease from the previous year, even as the final quarter showed signs of recovery with a notable 39.9% of funding attributed to mega-round deals.

The report suggests that 2023 may signify a shift towards more mature market behaviors, with consistent transactions indicating a healthy industry despite reduced funding. It highlights a growing interest from reinsurers in private technology investments, suggesting a potential rapid adoption and scaling of new technologies in the near future.