Insurtech Funding Enters a New Era as AI and Commercial Insurance Drive Q3 Momentum

Global insurtech funding has entered uncharted territory, with quarterly investment volumes stabilizing at approximately $1.1 billion per quarter over the past three years—a dramatic departure from the extreme volatility that characterized funding in the sector from 2020 to 2022, according to Gallagher Re’s Q3 2025 Global insurtech Report.

After years of boom-and-bust funding cycles, the insurtech sector has achieved what industry observers consider a sustainable baseline, the report said. Seven of the past 11 quarters have recorded funding within a 20% swing of the $1.1 billion mean average, with 10 of 11 quarters falling within a 30% swing. Funding in the third quarter of 2025 reinforced this pattern, delivering $1.01 billion in funding—a slight decline from the previous quarter’s $1.09 billion total but well within the established range, the report said.

This stability reflects a fundamental shift in investor strategy, according to Gallagher Re. The “winner-take-all” mega-rounds that characterized 2020 and 2021 have given way to a more balanced portfolio approach. Silicon Valley venture capitalists have recalibrated their appetite for early-stage risk, while traditional insurers and reinsurers have become more selective in their technology investments, the report said.

Notably, Silicon Valley VCs have accounted for 55.9% of all insurtech capital invested since 2012, yet their activity now closely tracks that of reinsurance-backed investors—a convergence that signals a maturing market, the report said.

However, beneath this quarterly stability lies a market experiencing significant structural shifts. Q3 2025 recorded only 76 deals—the lowest count since early 2020—even as average deal size increased to $15.70 million from $12.83 million. This dynamic indicates that while overall capital volume remains consistent, the composition of that capital is changing dramatically, Gallagher Re said.

AI and Commercial Insurance Reshape Funding Flows

Artificial intelligence dominated Q3 2025 fundraising, with AI-centered insurtechs capturing 74.8% of all funding across 49 deals. Yet the most striking development was the sharp divergence between insurance segments. Life and health insurtechs experienced a 56.8% funding decline quarter-on-quarter, while property and casualty insurtechs surged 90.5%, rising from a seven-year low of $362.34 million to $690.28 million in Q3.

This rebalancing reflects evolving market opportunities, the report said. Life and health funding earlier in the year had concentrated heavily on employers transitioning to Individual Coverage Health Reimbursement Arrangements (ICHRA), a model allowing employers to provide fixed allowances for workers to purchase individual health insurance coverage. ICHRA-focused startups had captured nearly 20% of all insurtech funding in the second quarter, including $144 million raised by Gravie.

Commercial insurtech secured $470.67 million in Q3 funding across 37 deals, cementing its position as a major focal point for the sector. Of the quarter’s top 10 deals by funding amount, eight went to property and casualty companies, with four companies—Kin, SAFE, ServiceUp and Wefox—each securing funding commitments of $50 million or greater.

Reinsurance companies demonstrated their own conviction in this shift, backing a record 51 tech investments during the quarter, up from 31 in Q2. MS&AD Holdings led this activity, investing in 10 companies through its venture capital arms, including notable bets on space commercialization alongside more traditional insurance technology.

Commercial Insurance at an Inflection Point

Commercial insurance is experiencing a transformation driven by changing customer expectations and emerging operational challenges, according to Gallagher Re’s analysis. Small business owners increasingly expect digital purchasing experiences comparable to consumer insurance markets, compelling both established insurers and insurtechs to build omnichannel distribution systems. Over 25% of commercial insurance is now sold through digital channels, yet this masks substantial differences between segments.

Smaller enterprises are rapidly adopting direct-to-consumer digital models, while larger and more specialized businesses continue relying on broker relationships. This segmentation reflects a critical insight, the report said: automation is freeing human advisors to focus on complex, high-value risks rather than routine transactions.

AI is redefining how commercial insurers approach risk assessment, Gallagher Re said. Rather than replacing human underwriters, emerging technologies are enhancing their capabilities through workflow automation—extracting data from unstructured documents, validating applications, identifying portfolio patterns and surfacing potential fraud. This approach acknowledges a fundamental difference between commercial and personal insurance: commercial risks involve greater complexity, longer time periods, higher severity potential and less readily available public data.

“Black-box decision making and instantaneous pricing are far less effective in commercial insurance than in other lines of business,” the report notes.

Commercial insurtech has attracted substantial investor attention, with an estimated $9.8 billion of the $61 billion invested in the sector since 2012 directed toward commercial-focused ventures. Approximately 297 insurtech companies are currently active in the commercial space, concentrated primarily in the United States with 146 actively funded companies, followed by the United Kingdom with 35 and France with 16, the report said.

Obtain the full report here. &