The status of Latin American insurtech in 2023
Due to the current macroeconomic, political, and social context, global investment in startups has undergone a drastic reduction, with slower growth in nearly all regions. However, with regard to the status of insurtech in LATAM, this market has 470 insurtech companies. The region continues to grow, although growth is lower than in previous years.
According to the last GIP-MAPFRE Global Insurance Potential Index prepared by MAPFRE Economics, the global insurance deficit grew by 14.3% in 2022, reaching 7.8 trillion dollars. Inflation, geopolitical tensions, and the current landscape of uncertainty are some of the factors that have directly impacted this growth.
Focusing on LATAM, the latest McKinsey report indicates that “the penetration gap between Latin American insurance and the rest of the world is shrinking. This can be attributed to the enormous growth in premiums compared to other markets.”
The region’s insurance market is currently growing in terms of both premiums and sophistication: in 2022 it grew 15.9% to 173.674 billion dollars. This opens up a wide range of possibilities for global, regional, and local insurance companies to not only increase their profits and grow, but also impact the population with new business models. It is currently one of the most profitable markets for insurance companies.
More insurtech startups, but less growth than other years
Just as the above-mentioned factors have impacted the global insurance deficit, they have also affected venture capital investment, causing a drastic reduction in the funding of startups worldwide. As a result, growth has slowed in virtually all regions.
Regarding the outlook on insurtechs—companies that apply technology and innovation to the insurance industry—LATAM currently has 470 insurtechs, according to the recently published report LATAM Insurtech Journey. This represents 40 startups more than last year (470 vs 430), and Brazil, Mexico, and Argentina are the three countries with the largest number of these companies (198, 108, and 78, respectively).
This group of nearly 500 companies represents around 7% of the total startups in the sector worldwide, and only 2% of total funding. This makes the opportunity gap clear: in such a broad and emerging territory as Latin America, greater momentum is needed to drive the insurtech market. Actors in the region need to focus their efforts, while external agents must be incentivized to inject liquidity into the territory, something that is already beginning to happen through different global funds.
The context of shrinking investment does not help insurtech startup survival either: mortality stands at 11%, five points above 2022 (6%). The regions where the strongest growth is observed are in Chile, Peru and Mexico, in that order; Brazil remains one of the main drivers, but with growth below that of 2022.
Insurtechs with the highest funding in the region in H1 2023
In the first half of 2023, 99 million dollars were invested in insurtech startups, corresponding to a total of 18 operations. The startups receiving the highest investment were as follows:
Although growth slowed in the Brazilian market, six of the 10 startups that have received the most funding are from that country, which is the leader by a wide margin. Mexico ranks second, followed by Chile.