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13 September 2019 Insurance

Insurtechs raise record $3bn in funding in first half of 2019

Insurtech firms raised a record $3 billion in new funding in the first half of 2019, with developments such as usage-based insurance boosting demand in the sector, with European companies attracting the lion's share.

The figure comes from technology mergers and acquisitions advisors, Hampleton Partners. The company said that last year, insurtech fundraises increased 27 percent, with 257 deals closed in 2018, compared with 202 deals completed in 2017.

Financial buyers remain active, said Hampleton, as the proportion of private equity acquisitions came in at 15 percent, largely in line with the 13 to 15 percent share observed over the past few years.

Miro Parizek, founder of Hampleton Partners, said: “In this high-growth sector, we have seen more venture capital funding being funnelled into larger- and higher-valuation deals that have already shown success.

He added: “Insurtechs are taking advantage of global trends in smart home device tech to shift towards proactive risk management for homeowners, rather than reactive risk assessment, in this new disruptive business model.”

Data collected by connected devices in homes, cars and smartphones provides a detailed profile of consumer habits and activities, which enables insurers to accurately risk-adjust tailored insurance packages for every individual, said Hampleton. Currently, smartphone usage-based insurance (UBI) is one of the biggest strategic priorities among insurers.

Over the past seven years, deal count has increased steadily, growing 27 percent from 2017 to 2018. The value of funds raised by insurtech firms annually almost doubled from 2017 to 2018, reaching a record $4.2 billion in 2018 from $2.2 billion in 2017.

In 2019, the volume of fundraising transaction has decreased, while growth in value has continued. A handful of large insurtech funding deals in the first two quarters of 2019 brought the total amount raised so far this year to almost $3 billion. It is on track to reach $6 billion by the end of the year.

This reflects the maturation of fintech unicorns, said Hampleton. There is also evidence of a growing shift towards financing larger deals, as the “spray and pray” approach to venture funding (including from insurance and reinsurance industry investors) has dampened, the company added.

Nearly a third of insurtech investments targeted European companies, with Europe’s global investment share growing from 23 percent to 31 percent. This trend is spearheaded by insurtech hubs in Germany, the UK and France – with half of the ten largest insurtech investments in 2018 flowing into companies based in Berlin, said the report.

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