InsurTech as a whole had a lackluster 2023, consistent with the broader funding and deals slowdown with the venture ecosystem as a whole, however the decline in InsurTech was much more pronounced. Total InsurTech funding in 2023 was down to $4.6 billion, a dramatic decrease from 2022 ($8.6 billion) and 2021 ($15.4 billion). Additionally, megadeals (deals defined as $100 million +) and the total number of InsurTech deals had fallen 31.2% relative to 2023. Late stage funding as a whole has seen a significant drop off with the average round size down 36% from $62.5 million to $40 million on average. Mid-stage and early stage funding has provided more resilient with Mid-Stage funding dropping on average 12% from $25 million to $22 and early stage funding remaining flat at an average of $3 million per round. Both P&C and Life & Health activity were down with declines of roughly 25% and 45% respectively. InsurTech exit activity fell roughly 30% with no IPOs and only 1 startup reaching unicorn status (Kin).
In terms of 2024, InsurTech valuations and opinions seem to be mixed with multiple signals to the positive and negative so far . Q1 '24 has seen a 50% decline in InsurTech deal volume in Europe representing a massive decline over an already negative 2023 with deal levels falling to 16 total. In contrast, InsurTech stocks have been high-flying in the U.S. equity markets with Root and Hippo Holdings posting huge gains YTD of 273.1% and 58.6% and benefiting from more agile and streamlined business models after years of lack-luster performance with S&P finding a market-cap weighted basket of these stocks posted gains of 22%. Additionally, S&P views that the combination of industry consolidation, “profitability optimization”, and lower growth rates would jump start valuations. However, the “higher for longer” rhetoric from the Fed that is coming off the back of sticky inflation numbers, could push this scenario further out into 2025 and 2026. There is an abundance of factors at play here and this is a funding story definitely worth watching for the remainder of the year.