Insurtech VC funding picks up in the third quarter

Venture funding for insurtech startups rose to its highest level in over a year in the third quarter, according to research from investment bank FT Partners.

Why it matters: Investors are betting on insurtech again despite a lack of exits.

By the numbers: Insurtech financing volume rose to $2.7 billion in the third quarter, up 120% over the second quarter.

• That represented the sector's largest haul since the second quarter of 2022, when insurtech startups raised $2.7 billion in aggregate.
• Insurtech startups have raised $5.1 billion year to date, representing $6.8 billion in annualized volume — below the $8.6 billion raised in full-year 2022 and well below the $17.5 billion raised in 2021.

Yes, but: M&A activity remains muted compared with previous years.

• At $7.4 billion, the value of insurtech acquisitions year to date has surpassed the full-year total of 2022 ($5.4 billion) but is far below 2021 ($26.6 billion) and 2020 ($20.1 billion).

Of note: For the second year in a row, there have been no insurtech IPOs — not surprising given the performance of companies that went public in 2020 and 2021.

• Those declines have been led primarily by high cash burn, direct-to-consumer companies like Lemonade (down 45%), Oscar (down 82%) and Root Insurance (down 98%).