AI Companies Top Insurtech Funding

Certainly, the trend for the first three quarters was a continuation of fairly consistent levels of funding around the $1 billion mark [per quarter]—although Q4 was significantly higher. (See sidebar: Insurtech Funding Rebounds) Now, whether that marks the end of a trend, or is just a single quarter that may have a number of deals that added to that overall growth in number, is yet to be seen.

The other two major trends are the levels to which insurers and reinsurers invested during 2025, which was an unprecedented high, which speaks to the confidence that insurers and reinsurers now have in making those sorts of investments, and one step further, even potentially selecting long-term growth partners for them, where businesses or business outcomes are aligned.

Then, there is just the proportion [of] investment dollars going into companies that identify as AI firms. About 80% of last year’s [fourth-quarter] funding went into AI companies, or at least into insurtechs that identify as AI companies. That’s potentially slightly misleading. These are, in many cases, the same business, but they now have adopted the label of AI. They probably did have AI capability but never felt the need to say it, but also, as it’s a very invoked term at the moment, it does help valuations, candidly. On average, a company that says it’s AI is worth about 20% more, so there’s a lot of logic to adopting the label, but I don’t want to give you the impression it’s a brand-new class of companies that are attracting this capital. In some cases, it’s insurtechs that have been raising capital for the last decade that have adopted the label.

Confidence is a big part of it. We’ve been at this [the industry investing in insurtech] now since 2012, and insurers and reinsurers have a much better handle on what’s adding value [and] which companies are likely to be long-term partners where there is a long-term opportunity for both companies. Individual businesses are valued more cheaply, so it’s potentially more of a bargain to invest in some of these companies than it was, say, three or four years ago.

On the insurtech capital-raising side, there is also probably more of a demand now from the individual businesses wanting capital from insurers and reinsurers because of all the expertise that they can bring, because of the business acumen, the business partnership that they can bring, the distribution opportunities that they can bring. There’s both a push and a pull that we’ve just probably never seen to this degree before.

The insurers and the reinsurers are really looking to solve known problems. These are tackling those kinds of highly predictable, menial, rote, labor-intensive processes, where the idea would be that AI could come in and massively speed up an operation.

To throw a cold bucket of water on things, most of what we’re seeing could be classed under the label of automation. Most AI is automation at this point. We aren’t seeing huge amounts of creativity around human-like outputs, like we are seeing in other industries, not at scale at least. But anything that is highly predictable, very voluminous, where answers can be categorized into a slim number of boxes, is where most of the attention is focused, whether that’s data capture at scale, whether that’s deploying large language models at scale, whether that’s assessing sentiment at scale, whether that’s processing claims files at scale, using various kinds of OCR [optical character recognition] technology, that’s really the sorts of things that we see companies being interested in investing in, which is interesting, but it’s not necessarily cutting-edge stuff.

The industry has learned that there’s not as much competitive advantage to being a first mover as people probably think, and technology, by definition, is designed to scale and be reused. So it might behoove companies to wait a minute and see how experiments play out before they themselves begin to invest. Another part of that learning curve over the last 15 years has been to work as an industry, to kind of share notes, and see what’s working and what’s not.

Probably not. Megadeals are generally a fortuitous coincidence. Of the handful of megadeals that were done last year, they are likely to be companies that are around for a long time. The quality of the underlying company is incredibly high. Similarly, we saw a few companies go public last year, where we have had a dearth of that for the prior three or four years. And again, the companies that have gone public are particularly high quality, certainly compared to some of the businesses that were doing mega-round funding in, say, 2020, some of which no longer exist. I don’t tend to read too much into those individual deals because, despite capturing the funding headlines, they’re not actually very indicative of the broader insurtech scene underneath, which are many hundreds of companies.

But I do think it’s interesting that there is still clearly appetite to write some very big checks. And so, if nothing else, we can see that as a bellwether to the industry’s bullishness on the long-term value of some of these companies deploying tech appropriately in our industry.

It’s definitely picking up. Again, part of that speaks to prices coming down and people having a better understanding of where two and two can equal five. CAPE Analytics is a particularly interesting one because they really are supporting the core business of [new owner] Moody’s. We will probably continue to see a healthy stream of M&A. A lot of it will be large insurtechs partnering with other large insurtechs. We’ll still see the occasional insurer or reinsurer buying an insurtech. But these are businesses now that, in some cases, have been around for 10-plus years and are demonstrably successful, and the owners may decide that they want to do something else, or there may be a deal that’s presented to them that just makes a lot of sense.

There are some natural marriages now that are finding each other in the market. But much like the mega-round deals, we are talking about a very small proportion of the overall landscape, and I would estimate it’s probably 3,000 insurtechs on Earth at the moment. But I do think that M&A will be a consistent feature. Are we going to consistently see more than 10 [acquisitions] a year? Maybe, but I don’t think it’s going to be 100 a year.

The three main trends are consistency of funding, AI capturing most of the funding headlines, and insurers and reinsurers participating so actively at the moment. These are all very positive signals. These are all clear signals of a very maturing, very sustainable, long-looking investment thesis that stands our industry in really good stead.

You could say that 15 years is a long time to get there, but actually, we’ve done a great job of quickly getting to this space. What we’ll probably end up seeing now is just, year on year, a gradual increase in total investment, whether that’s driven by inflation and [interest rates], or a renewed interest, I don’t know yet.

But the industry is incredibly well positioned for the long term. AI has presented some challenges along with the opportunities, not least understanding its true value. Some insurers and reinsurers are still grappling with where the long-term value of AI is going to be. But if we work as an industry, we’ll undoubtedly get there.