SEA insurtech deals jump 4x to US$2.35b in 2023: EY report

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Deals in Southeast Asia’s insurtech sector recorded a total value of US$2.35 billion in 2023, up from US$538 million in 2022, indicated a report by EY in August.

This is despite macroeconomic and geopolitical challenges, and the fewer number of deals in the year – 27 deals took place in 2023, while 39 were closed in 2022.

The majority of deal value in 2023 was driven by Japanese insurer Sumitomo Life’s US$2 billion acquisition of Singlife and Singapore-based insurtech company Bolttech’s US$246 million series B round.

EY noted that investors prefer established insurtech companies with a proven track record amid a general flight to safety. Riskier early-stage companies secured only two publicly announced series A deals amounting to US$2.3 million in 2023.

Investors are also looking at companies driving digital transformation, given investments by tech unicorns and traditional financial service providers into insurtech platforms to enhance product offerings and customer experiences.

The deal value in 2023 was slightly below the 2020 high of US$2.35 billion from 32 deals, which was driven largely by Singlife’s merger with Aviva Singapore valued at over US$2 billion.

But the deal count fell from the peak of 46 in 2021, as conditions deteriorated amid hawkish rate policies, geopolitical tensions, and rampant inflation.

EY expects the pullback in deal velocity to be temporary, driven by the need for short-term correction as insurtech reorientates itself and focuses on tighter financial management and working towards profitability.

“A healthier reset will allow insurtechs to emerge more resilient, instill greater confidence in customers, and become well-positioned to capture the rapidly growing insurance opportunity in the region,” said the report.

Rahul Vardhan, partner for strategy and transactions at EY, expects fundraising in the short to medium term to gear towards category leaders that have a record for sustainable and profitable growth.

See also: Are Asia’s insurtech players pouring new wine into old wineskins?

Regional expansion

Presence across multiple jurisdictions is a key differentiator to scale in Southeast Asia’s underpenetrated insurance market, Vardhan said.

Yet regional expansion is capital-intensive and requires a strong understanding of local regulations, especially for underwriters.