Insurtech: on the road to further consolidations. Part 3.

In continuation of several articles devoted to the current and forecasted development of the Insurtech market, below we present a mid-term forecast for its development and major long-term macroeconomic factors of its development.
With the CAGR of 19%, recorded by the result of the last 5 years, the global market for investments in Insurtech companies and projects, in our basic scenario, has the opportunity to grow by another 40–45% from the current volume in the period until 2023. According to our baseline scenario, in the period up to 2023, the insurance market may reach $ 11 billion, with approximately 550 transactions closed by the result of 2023Y.
The basis of the predicted dynamics lies within several long-term factors, among which following tendencies are key:
1. Expansion of the liquidity channel due to a new wave of quantitative easing in the US, led by the Fed and similar measures by other central banks. We expect that overall more than 200bln USD will be transferred through the existing liquidity channel to the VC market within next 5 years;
2. Relatively high pace of growth of the Insurance market itself. As the “basis product” for the Insurtech industry (Insurance market) to demonstrate higher than average economic growth, we expect Insurtech market also to demonstrate outperforming growth rates;
3. Relatively low penetration rate of the Insurtech in several sectors of the global market. Some of the most fast-growing segments of the global Insurtech market are underinvested nowadays by both VC capital and insurance partners;
4. Further markets consolidation. The market is moderately fragmented with quite a few players occupying the market share, indicating higher investment and M&A opportunities for the remaining companies and outstanding projects;
5. New technologies to lead the market. One of the key trends for this market in the long-run will be the further integration of big data and AI in the Insurtech industry, providing additional growth promoting factor;
6. Insurance profitability is currently low. This factor primary indicates the basis product’s market opportunity, but in the long-run it will also influence Insurtech markets, as the investment demand for Insurtech’s to be predominated by demand on insurance;
7. Europe’s surplus. Significant part of the market’s growth is expected to originate from Europe, due to the fact that data has become a strategic asset across region and the adoption rate of technology in this region is higher compared to world. On the other hand, there is still sufficient amount of unsatisfied supply of Insurtech projects in the region;
8. Additional demand from allied sectors. The offering of flexible and customized insurance for health, property, and others is encouraging people to choose among the insurance plans that suit them the best;
9. Further regional opportunities. Asia Pacific holds a huge potential for the vendors and is expected to grow at the highest CAGR during the forecast period 2018–2023 (we expect the overall CAGR for this region to be approximately 21–25% Y/Y). The Asia Pacific region is likely to witness growth in Insurtech due to the presence of few emerging countries and financial hubs in China, Singapore, and India.
In the long-term we expect the average CAGR of the development of market for Insurtech investments to be approximately 10–12%. This is higher than average forecasted CAGR of the Fintech market as the whole (approximately 7–9%) and of the global insurance market (approximately 4.4%-5%). This provides value investors with elevated investment opportunities and high marginality.
