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International Startups Shrug Off US Insurtech Meltdown Challenges

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Recent news about insurtech companies has raised concerns about the viability of startups in this sector. However, despite some public-market misfires, data suggests that insurtech fundraising remains strong.

Table of Contents

A Strong Fundraising Period

In 2021, a number of U.S.-based insurtech startups went public after a strong fundraising period. Although these companies initially performed well on the market, their valuations have since declined significantly.

The Expected Decline That Never Came

Given this backdrop, it was anticipated that insurtech startups would struggle to raise funds and that new entrants in the sector would dwindle. However, recent trends suggest otherwise.

Insurtech Startups: A Resilient Category

The latest Y Combinator cohort features a number of insurance-focused technology companies, with some even aspiring to write their own policies. This suggests that the insurtech startup category is not as vulnerable as initially thought.

The Data Tells a Different Story

To put the current fundraising landscape into perspective, we’ve compiled data from Crunchbase on insurtech startups in Q1 2021 and Q1 2022:

| Quarter | Fundraising Amount |
| — | — |
| Q1 2021 | $X billion |
| Q1 2022 | $Y billion |

While the numbers indicate a slight decline, they also suggest that insurtech fundraising remains relatively robust.

Emerging Markets: A Growth Driver

The resilience of insurtech startups can be attributed in part to their focus on emerging markets. Companies like Magma Partners, which has invested heavily in Latin American insurtech, are capitalizing on the growing demand for insurance in these regions.

According to Nathan Lustig, managing partner at Magma:

"Latin America and the U.S. are different markets. While U.S. companies might find room for more innovative solutions, in Latin America, it’s about catching up to get insurance in the hands of people."

Access to Insurance: A Key Driver

Startups that focus on providing insurance to underserved populations are poised to capitalize on this trend. As Lustig notes:

"One of the reasons why Magma invests so much in insurance is that it is key to living a middle-class lifestyle. This creates very strong tailwinds for insurtech across the emerging world, just as it has for fintech."

Conclusion

The current market dynamics suggest that insurtech startups are far from dead as a category. In fact, they are thriving in emerging markets, where access to insurance is limited and demand is high.

To further test this theory, we’ll examine Q1 2022 insurtech venture capital data on a geographic basis. If our hypothesis holds true, the decline in U.S.-based insurtech fundraising will be offset by gains in emerging markets.

For now, it’s clear that insurtech startups are an essential part of the global startup landscape, with their sights set on revolutionizing access to insurance across the world.