Reinsurance broker Gallagher Re has reported a significant rise of 39.7% in global financing for insurance technology (insurtech) firms, with funding reaching $1.27bn in the second quarter of 2024 (Q2 2024) compared to the first quarter.
This growth is largely attributed to investments in businesses focused on artificial intelligence (AI), as detailed in Gallagher Re’s Global InsurTech Report for Q2 2024.
Record levels in early-stage funding
According to the report, there has been a substantial rise in early-stage insurtech funding to $377.6m and an increase in the average deal size to $18.46m, the highest since the third quarter of 2022.
Despite these increases, the number of deals fell to 82, marking the lowest quarterly count since the second quarter of 2020. AI-centric insurtechs accounted for a third of these deals, with 40% directed towards firms focusing on risk management.
Sector-specific growth and shifts
Gallagher Re’s Global InsurTech Report for Q2 2024 also details that property and casualty (P&C) insurtech funding rose from $605.6m in the first quarter to $854m in the second quarter of 2024. It highlighted that the average deal size for P&C insurtechs reached $19.4m.
Life and health (L&H) insurtechs similarly saw growth, with funding reaching $420.2m and the average deal size peaking at $16.8m. The report noted a significant shift towards business-to-business (B2B) insurtechs, with 57.41% of P&C deals and 71.43% of L&H deals in the second quarter directed towards B2B companies.
AI-centred funding and partnerships
AI-centred insurtechs raised $445.8m across a third of the deals in the second quarter, as noted in Gallagher Re’s Global InsurTech Report for Q2 2024. This period also saw 33 tech investments from (re)insurers, with over half targeting US-based companies, predominantly in early stages such as seed and Series A rounds.
Leading the investment activity were the Blue Venture Fund and MassMutual Ventures, each with four investments. Major partnerships formed during the quarter included alliances between Allianz and ClearSpeed, Hartford Steam Boiler and WINT, and MassMutual and Genomics.
Ongoing challenges in integrating AI within insurtech
The report discusses ongoing challenges in integrating AI within insurtech. It mentions AI’s crucial role in detecting deepfakes through advanced technologies, emphasising the need for continued human oversight in underwriting and claims.
Furthermore, Gallagher Re’s Global InsurTech Report for Q2 2024 highlights the critical task facing the industry, which is balancing AI’s use in optimising pricing and managing risk portfolios. This balance is essential to avoid reducing the capital pool necessary for providing affordable insurance.
The report suggests that careful management is essential to ensure that AI enhances rather than undermines industry competitiveness and accessibility.
