A total of 66 InsurTech investment deals in Q1 2018 marked a new high for the InsurTech sector, according to Willis Towers Watson.
Wilis Towers Watson said transaction sizes continued to increase in Q1 2018 and the line between InsurTech funding by incumbent re(insurers) and traditional venture capital was blurred by newer ‘hybrid’ investment funds.
Findings from the latest quarterly InsurTech briefing from Willis Towers Watson revealed that InsurTech investment volume of $724m in Q1 was 16% greater than the $624m recorded in Q4 2017, and up 155% from Q1 in 2017.
The research said insurance sector incumbents prefer minority investments in start-ups developing technology which will ease their own commercial pressure points, including distribution costs, claims handling, and underwriting excellence.
They seek improved processes, and focus on nodes within the value chain that present the biggest challenges. Achieving an outsized investment return is secondary to incumbent investors.
As InsurTech investment surges, Willis Towers Watson said companies are finding a third way. A subset of specialist insurance investors is creating a ‘hybrid’ model in which they seek to blend the best of both traditional and incumbent (re)insurer venture capital models.
These ‘hybrid’ models are looking to combine the traditional VC investor mentality with the industry expertise of incumbents to create a more aligned model that targets both financial and strategic returns for its investors.
Rafal Walkiewicz, CEO, Willis Towers Watson Securities, said: “For InsurTech start-ups, the funding scene is more complex, and finding the right investment partner has become more difficult. Hybrid models will continue to evolve, and may be the ultimate answer for InsurTech entrepreneurs looking to balance industry expertise and the traditional VC value-creation mentality.”