By Mia MacGregor

Feb 14 - (The Insurer) - Annual insurtech funding fell 5.6 percent last year to $4.25bn, its lowest level since 2018, according to a new report from Gallagher Re.

The reinsurance broker's Global InsurTech Report attributed the overall decline to a significant drop in P&C insurtech funding, which fell 24.3 percent year on year to $2.59bn in 2024.

Conversely, life and health (L&H) insurtech funding surged 53.6 percent year on year to $1.66bn.

Gallagher Re reported that the number of insurtech deals fell even more sharply than total funding, declining 18.5 percent from 422 deals in 2023 to 344 in 2024 – the lowest count since 2019.

The decrease in deal volume coincided with a reduction in the number of venture investors in insurtech, from 574 in 2023 to 466 in 2024, according to the report.

AI-centred insurtechs accounted for 34.6 percent of all deals in 2024. Gallagher Re noted that AI-enabled insurtechs, on average, raised an additional $5mn compared with their non-AI counterparts.

Early-stage insurtech funding rose 8.8 percent year on year to $1.22bn, while the average insurtech deal size increased 14.6 percent year on year to $14.7mn.

Additionally, the report noted that mega-round funding, which refers to deals of $100mn or more, remained relatively stable, dipping slightly from $969mn in 2023 to $930.2mn in 2024.

Geographic trends

Gallagher Re reported that the US continued to dominate the global insurtech market, accounting for 50.6 percent of all deals in 2024.

Meanwhile, the UK solidified its position as the second-largest insurtech market with 9.3 percent of all deals – an increase of nearly 2 percentage points from 2023, marking the largest gain among all countries.

In contrast, South Africa suffered the steepest decline in deal share, falling from 1.2 percent in 2023 to zero in 2024.

(Re)insurer-led investments hit record high

Despite the overall downturn in investment, Gallagher Re reported that investments by (re)insurers reached an all-time high, with 150 deals completed.

“While the appetite from VCs and PEs has dropped for the time being, (re)insurers clearly see the opportunity that technology and insurtechs present, and are investing accordingly,” the report stated.

Global insurtech funding halved quarter on quarter

The $688.2mn of global insurtech funding in Q4 2024 was the lowest quarterly total since the second quarter of 2018.

Both P&C and L&H insurtech funding fell sharply quarter over quarter, with P&C dropping 43.5 percent to $408.4mn and L&H dropping 57.4 percent to $279.9mn.

Gallagher Re noted that the overall decline was driven by smaller average deal sizes, which fell from $20.9mn in Q3 2024 to $11.1mn in Q4 2024.

Additionally, while 55.5 percent of the $1.38bn raised in Q3 came from mega-round deals, Q4 saw no mega-round funding for insurtech startups. Early-stage funding also dropped 47.8 percent quarter over quarter to $193.8mn.

Despite the funding downturn, the number of insurtech deals ticked up slightly, increasing by one to 78 in Q4.

Gallagher Re noted that claims-focused insurtechs played a big role in Q4, accounting for 39 of the 78 deals. These companies also raised the majority (57.2 percent) of total Q4 funding.

Additionally, insurance company-led venture technology investments increased from 35 in Q3 2024 to 45 in Q4, with 25 of those investments directed toward US-based companies.

A year of two halves

Gallagher Re characterised 2024 as a year of two halves: a steady and promising first half, followed by a more volatile second half. After an initial surge in mega-round activity, funding dropped sharply in Q4, according to the company.

“We think that 2024 has marked a pivot into a period of greater sustainability ... While 2022 and 2023 were awash with stories of mass layoffs and asset selling among insurtechs, in 2024 we began to see positive results from some of the restructurings undertaken in the prior years,” the report stated.