Decline in Investor Participation and Funding Trends
Investor participation in the insurtech sector has continued to show a downward trend, with only 186 active investors involved in the third quarter of 2025. This marks a significant decrease from the peak levels observed in previous years, highlighting a broader shift in investor confidence and market dynamics.
Global insurance technology (insurtech) funding for Q3 2025 totaled $1 billion, which represents a $0.1 billion drop compared to the previous quarter. Despite this decline, certain segments within the insurtech space have shown some resilience. Property and casualty (P&C) insurtechs experienced a slight rebound, securing $0.7 billion in funding during the period. Meanwhile, life and health (L&H) insurtechs managed to raise $0.3 billion, indicating that there is still interest in specific areas of the market.
The median early-stage deal size has also seen a notable reduction. Year-to-date, the average early-stage investment has decreased by 24%, falling from $3.8 million in 2024 to $2.9 million in 2025. This suggests that startups are facing greater challenges in securing larger amounts of capital, which could impact their growth trajectories and innovation capabilities.
Early-stage startups continue to dominate the insurtech landscape, accounting for approximately 60% of all deals. This share represents the lowest level since 2011, signaling a potential shift in the composition of the market. As more established companies gain traction, the proportion of early-stage investments may continue to shrink.
Slowing Deal Activity and Investor Engagement
Insurtech deal activity has also slowed significantly. In Q3 2025, only 76 deals were recorded, marking the lowest level since the second quarter of 2016. This figure represents a decline from 90 deals in Q2 2025 and a substantial drop of 65% compared to the peak of 219 deals recorded in early 2021.
The slowdown was particularly evident in both P&C and L&H segments. P&C deals fell to 56, while L&H deals dropped to 34—both reaching their lowest levels since late 2014. These numbers reflect a broader trend of reduced transactional activity in the insurtech sector, which could be attributed to various factors such as economic uncertainty, regulatory changes, or shifting investor priorities.
Investor participation in insurtech has continued to decline, with only 186 active investors involved in Q3 2025. This number represents a 72% drop from the peak in Q2 2021 and is slightly below the 184 investors recorded in early 2017. The reduction in active investors underscores the challenges faced by the sector in attracting and retaining capital.
Despite this decline, there are signs of strategic movement within the industry. Thirteen investors made two or more investments in Q3 2025, including notable players such as American Family Ventures, ManchesterStory Group, Munich Re Ventures, and OperaTech Ventures. These investors appear to be focusing on specific opportunities, suggesting a more selective approach to funding decisions.
Mergers and Acquisitions Show Growth
Interestingly, despite the overall slowdown in funding and investor activity, insurtech mergers and acquisitions (M&A) have seen an upward trend. There were 21 M&A deals recorded in Q3 2025, an increase from 16 in the previous quarter. This marks the highest level of M&A activity since Q3 2022, when 23 deals were recorded.
This trend indicates that some insurtech companies are finding value in strategic partnerships or acquisitions, either to expand their capabilities or to consolidate their positions in the market. As the sector continues to evolve, it remains to be seen whether this increased M&A activity will translate into sustained growth or if it is merely a temporary response to the current market conditions.