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Insurtech Unicorns, M&A Drivers, and a Cloudy Macro Outlook
After the champagne highs of 2021’s $16.6B peak, InsurTech is now facing a sharp funding drought, with deal counts and valuations collapsing.
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Good morning, ! This week we’re tracking the unicorn Insurtech landscape, the finance and insurance macro outlook looking blurry, a proprietary survey analysis on top drivers of insurance M&A in 2025, and investor activity in the Insurtech space.
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DATA DIVE
InsurTech’s Unicorn Hangover
After a champagne-soaked 2021, InsurTech is deep into a detox. That year’s $16.6B VC peak has been followed by a four-year funding slide—$5.2B in 2024, with just $1.8B recorded in Q1 2025. The volume drop is sharper: deal count has cratered from 867 to 121. Even so, the unicorn herd hasn’t fully thinned. Standouts like Devoted Health ($13B valuation) and NeueHealth ($11.1B) still dominate headlines. But new capital comes with strings—unit economics, operational discipline, and a credible path to profit. Exits are equally volatile: $3.3B in Q1 2025 is a bounce, but still shy of 2021’s record $38.8B. What’s clear? VCs have swapped spray-and-pray for sharpened pencils. Winners are leaning into embedded insurance, AI, and telematics, where business models marry technical edge with margin math. Everyone else? Just hoping to stay on the cap table.
TREND OF THE WEEK
Insurance Hits the Side Mirror
The financial sector’s outlook just got blurrier—and insurance is caught in the smoke. Equity markets flopped into 2025, and credit intermediation is tightening like it’s 2008. The result? Flat revenue growth for insurance, with P&C carriers facing heavier-than-expected payouts and commercial premiums already in decline. There’s a glimmer for Funds and Trusts amid the chaos, but traditional insurers are watching rate leverage erode under inflation and disaster risk. It’s a sector walking on a wet floor—steady for now, but one slip away from a fall.
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INSURTECH CORNER
Betting Big on the Future
Insurers aren’t just writing policies—they’re writing checks. On average, 40% of top insurers’ deals now target InsurTech, with standouts leaning even heavier. Zurich leads the pack, with 75% of its deals in InsurTech. MS&AD (50%) and Munich Re (46%) also put tech at the center of their venture strategies. By contrast, legacy players like AXA (16%) and MassMutual (19%) are dabbling more cautiously. Mundi Ventures is particularly aggressive, with 57% of its investments in the space, while Allianz and Liberty Mutual land in the mid-range. The focus? High-growth areas like distribution, cyber-security, life insurance, and risk management. For insurers, the game is clear: traditional underwriting may drive today’s profits, but InsurTech bets are about owning tomorrow’s infrastructure. (More)
DEAL OF THE WEEK
Sompo Bets $3.5B on U.S. Expansion via Aspen
Japan’s Sompo Holdings is making a $3.5 billion all-cash move to acquire Aspen Insurance Holdings, marking one of the largest Japan-U.S. insurance transactions in recent years. Advised by Skadden, Sompo will take full ownership of Aspen’s Class A ordinary shares, while Sidley Austin represented the target.
The acquisition—set to close in H1 2026 pending regulatory approvals—deepens Sompo’s global re/insurance play. Aspen, with its specialty underwriting and reinsurance footprint, offers Sompo broader access to U.S. and UK markets and bolsters its international platform as Japanese insurers continue their post-Abenomics pivot toward outbound M&A.
No changes are expected to Aspen’s outstanding preferred shares, but the companies may later explore options like redemption or delisting. The legal complexity spans the U.S., UK, Bermuda, and other jurisdictions, signaling the deal's global regulatory weight.
Why it matters: With low-growth domestic markets, Japanese insurers like Sompo are turning to international M&A to fuel scale and underwriting diversification. For U.S. and Bermuda players, this deal underscores growing Asian interest in specialty markets. (More)
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MACROECONOMICS
Gross Capital Formation: Your New Favorite KPI That Actually Predicts Winners
Investors have a new best friend: Gross Capital Formation — the % of GDP a country reinvests into things that actually drive productivity (infrastructure, factories, tech, machinery). It’s the clearest macro signal of future prosperity — and most investors sleep on it.
The big lesson? High GCF = high potential. The Asian Tigers weren’t a fluke — they pumped 30–40% of GDP into the real economy for decades. Now, India and Vietnam are following suit. These countries aren’t just growing — they’re compounding. Low GCF? That’s a red flag. You’re not buying growth — you’re buying stagnation dressed up with demographics or commodities.
So if you're scouting emerging markets, stop obsessing over cheap labor or short-term GDP spikes. Follow the builders. Infrastructure is destiny. GCF is the tell. (More)
MICROSURVEY
What’s Really Driving Insurance M&A in 2025?
A new Insurance150 survey of 45 executives shows deal drivers are far from uniform. 44% of respondents cited private equity dry powder as the top catalyst, ahead of regulatory or capital pressure (33%) and traditional cost synergies and scale (22%).
The takeaway: while buyout funds remain the loudest force in the market, regulatory arbitrage and balance sheet relief are top of mind in the boardroom.
Expect a two-speed M&A market this year—financially driven PE deals in specialty and distribution, alongside capital-driven consolidations among mid-sized carriers. (More)
TWEET OF THE WEEK
The Fed's preferred measure of inflation has moved up to 2.9%, the highest since February.
Is that going to stop them from cutting interest rates next month?
The market is saying no, with the probability of a cut still at 87%.
The Fed has lost all credibility when it comes to
— Charlie Bilello (@charliebilello)
12:50 PM • Aug 29, 2025
"The ones who are crazy enough to think they can change the world, are the ones who do."
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