Insurtechs have raised more funding in the first half of this year globally than for all of 2020 after a record second quarter, Willis Towers Watson says in a report that also warns some businesses may be rushing toward public listings without being ready for market realities.

Companies raised $US4.8 billion ($6.5 billion) in the June quarter, up 89% on the March period, across 162 deals. The increase was boosted by 15 mega-rounds, which are considered to be those raising at least $US100 million ($135 million).

The record quarter took first-half investment to $US7.4 billion ($10 billion), which compares with $US7.1 billion ($9.6 billion) for all of last year, WTW says in its latest Insurtech briefing.

Willis Re Global Head of Insurtech Andrew Johnston says it’s clear “there is still more investment capital looking for a home than there is grey matter itself” which has led to some “grossly overvalued businesses” as the insurance industry looks toward technological evolution and social change.

“Insurtechs are moving more quickly into the IPO stage, a sign that they are either ready for the prime time or investors may be a bit overeager in a very bullish market,” he says.

The report notes most public insurtech shares are currently experiencing a downward trend, as is often the case with “relatively exciting” new investment opportunities during periods of volatility and uncertainty, pointing to the risks for listings.

“This is not to suggest, however, that there will not be a positive future for many insurtechs that can survive this uncertainty, and to this point, some individual businesses are demonstrating some impressive resilience already,” Dr Johnston says in the report.

Insurtechs that bring differentiated risk offerings, streams of liquidity or processes have the greatest chance of long-term success, but many are rehashing tried and tested products and processes that “at best, add marginal value around the edges” without justifying the cost of disruption, he says.

“Changing market conditions do present some insurtechs with an opportunity to take advantage of shifting plates as competition becomes fiercer and restraints on capital require increased efficiency, but frankly most insurtechs are just not up to standard to survive a possible decade of stringent and volatile market conditions,” he says.

Willis Towers Watson estimates some 450 companies have failed since the term insurtech came into common usage about 10 years ago, highlighting that, despite the positive funding sentiment, not all firms will ultimately be successful.