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LAS VEGAS — Low interest rates and competition among buyers are helping to elevate valuations for insurtech companies, though the rising levels are not unique to the growing sector, according to a panel of investors and an analyst speaking at the InsureTech Connect technology conference in Las Vegas on Tuesday.
“It’s worth recognizing valuations have risen for insurtechs, and it’s clearly not unique to the technology space,” said Jay Gelb, managing director for Barclays Group U.S. Inc. in New York. He added that there is “a bit of FOMO,” or Fear of Missing Out, in the space, which compels investors to participate lest they miss opportunities.
“If you look across the industry, you have other areas where valuations are going up,” said George Schwegler, CEO of Transamerica Ventures Inc. in New York.
Low interest rates are helping drive investment, panelists said.
The high valuations should be viewed in the context of the wider market, said Carsten Maschmeyer, founding partner of Maschmeyer Group Ventures Inc. in San Francisco. “We have increasing valuations worldwide because of historically low interest rates.”
“In a world of zero percent interest rates going lower, debt fuels the market,” said Vincenzo La Ruffa, partner with Aquiline Capital Partners LLC in New York.
Andy Lerner, managing partner in New York with IA Capital Group Inc., sees the insurtech landscape as less homogenous.
“I think the sector as a whole is not overvalued,” he said. “The issue is some high-profile insurtech companies garner valuations that look too high,” adding that there may be a “shakeout” over the next year or two.
Competition and bidding among acquirers also helps drive valuations, Mr. Maschmeyer said.
“There are so many funds, as never before, with more money than ever before,” he said.
InsureTech Connect offers unparalleled access to the largest and most comprehensive gathering of tech entrepreneurs, investors and insurance industry incumbents from across the globe. Business Insurance is covering the event in Las Vegas on Sept. 23-25. View the slideshow.