The VC funding of the insurance technology (insurtech) sector has experienced a significant downturn, falling to $4.5 billion in 2023, marking a 44 percent decline from 2022, according to a report by broker Gallagher Re.
The report attributed the decline to investors being burned by inflated valuations within the sector.
A notable contributor to the sector’s poor performance was the U.S.-based insurtech Lemonade, which saw its stock market value plummet by over 85 percent since early 2021.
Despite the overall decline, reinsurers have shown resilience, focusing on insurtech players in more advanced growth stages. The report highlighted that reinsurers made investments in a record 148 deals in 2023, surpassing the previous record of 132 deals in 2019 by 12 percent.
Munich Re Ventures emerged as the most active corporate venture capital investor in 2023, while Plug and Play claimed the title of the most active traditional venture capital investor. Insurtech firms specializing in artificial intelligence, particularly those utilizing AI for claims fraud detection, attracted significant attention, according to Andrew Johnston, global head of insurtech at Gallagher Re.
In line with the smaller valuations, deal sizes have shrunk, but the number of deals in 2023 held up relatively well compared to deal volume. The report indicated a total of 422 insurtech deals in 2023, representing a 19 percent decrease from 2022.
