Insurtech funding experiences partial rebound in H1 2023
“The State of Global Insurtech”, prepared by Dealroom.co, Mundi Ventures, Mapfre, NN Group, and Generali and released earlier this year, reported that the Latin American insurtech ecosystem has emerged strongly in recent years.
In the first half of 2023, venture capital investment in insurtechs in the region hit $79 million. When compared with the first half of 2022, this is down 85%. However, the investment is still expected to rebound from the low in the second half of 2022.
Overall in 2022, Latin America brought in an investment of $241 million, much less than the $376 million in 2021.
“Latin America receives only 3.1% of this funding.”
Insurtech is now more global than ever, but the majority of the funding goes to North America, Europe and China, with approximately one-third of the funding flowing outside these three areas. Latin America receives only 3.1% of this funding.
Despite this, there are more than 60 venture capital-backed startups in Latin America, according to the report, with an enterprise value of $4.4 billion, up five times since 2020.
The report added that those living in Latin America are high users of digital technology, and are reachable through alternative channels such as fintech and e-commerce platforms, alongside Facebook and WhatsApp.
A prime geography for innovation
Hugues Bertin, partner at HCS Capital and chief executive officer of Digital Insurance LatAm, who was quoted in the report stated that the region is a prime geography for insurance innovation, given the strongly underserved population and high digital adoption.
Bertin says: “The traditional financial sector has underserved LatAm customers, with less than 50% having access to banking services. The most impactful inclusive solution that have emerged are neo-banks such as Nubank, serving 75 million customers, and digital wallets such as MercadoPago, which has 38 million users.
“We think insurtech startups in LatAm have the opportunity to replicate this in order to close the protection gap. Customers are very sensitive to the sustainable aspect and we observe a move from the traditional model into the triple impact model, including not only profitability but social and environmental impacts.”
Latin America is, on average, a less insured region among major markets. In recent year, insurance penetration in the region has increased from 2% to 3% on average, against a global average of 7.1%. The remaining protection gap amounts to approximately $250 billion.
The report adds: “The expanding middle class drives insurance demand and represents a significant market at risk. Insurance plays a vital role in preventing individuals from falling into poverty due to adverse events, thereby supporting middle-class growth and sustainability.”
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