US Insurtech Market Report: Blooming Green

January 31, 2024
1 min read

TL;DR:

  • The US insurtech market is showing signs of recovery and optimism in 2024.
  • Industry consolidation is underway, and companies are making progress on expense reduction plans.
  • Insurtech stocks rebounded in 2023, indicating renewed interest from public market investors.
  • Artificial intelligence (AI) will be a key factor in the success of insurtech companies, and they should embrace AI and promote their efforts to investors.
  • Insurtech stocks are still cheap compared to their 2021 valuations, but a gradual decline in interest rates could help the sector.

The US insurtech market is experiencing a turnaround in 2024, with signs of optimism and recovery. Industry consolidation is well underway, and companies that are strong enough to survive on their own have made progress on their expense reduction plans. Public market investors also seem less bearish on growth stocks, as evidenced by the rebound of many insurtech stocks in 2023.

While a return to the high valuations of 2021 seems unlikely, a gradual decline in interest rates could benefit the insurtech sector by enticing public market investors back into growth stocks and making venture funding less expensive for startups. Regardless of the macro environment, artificial intelligence (AI) is expected to be a key factor in the success of insurtech companies. AI has the power to transform industries and generate investor enthusiasm in tech stocks. Insurtech companies should fully embrace AI and highlight their efforts in this area to investors.

In 2023, insurtech stocks that have gone public on major US exchanges in the past four years saw a rebound, with a market-cap weighted index of these stocks showing a 22.2% increase compared to a decline of 54.0% in 2022. Despite this recovery, the stocks are still relatively cheap compared to their valuations in 2021, and companies have made progress in reducing net losses.

Special situations, such as the appointment of a new CEO or takeover bids, contributed to the gains of some insurtech stocks. Short covering also played a role in the stock gains, indicating improved prospects and better valuation. If this momentum continues, IPO activity is expected to pick up in 2024, with companies that are already profitable or on a clear path to profitability likely to have success.

Two insurtech companies that could consider an IPO in 2024 are Slide Insurance Holdings Inc. and Kin Insurance Inc. Slide Insurance specializes in homeowners insurance and has seen significant growth in premiums written. Kin Insurance targets catastrophe-prone regions, including Florida, and has a history of targeting capacity-constrained markets. These companies could benefit from a successful IPO by Slide Insurance, as well as favorable market conditions.

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