Insurtech Draws US$1.63bn As AI & Digital Risks Converge

Investment in insurtech reached US$1.63bn in the first quarter of 2026, according to Gallagher Re’s Q1 2026 Global InsurTech Report.

This is a marginal dip from US$1.67bn in Q4 2025, yet it signals a sustained return of capital after three years of flat quarterly funding.

A striking 95.2% of first-quarter funding goes to AI-focused companies, underlining where founders and carriers expect value and exposure to concentrate.

The sector is shifting beyond digitisation toward an AI and cyber nexus which is reshaping how risk is defined, transferred and priced.

Digital risks emerge as a unified line

Gallagher Re suggests the market is nearing an inflection point where cyber insurance, professional indemnity and AI liability coalesce into one business line: digital risks.

Loss drivers increasingly stem from common sources, including malicious threat actors and failures within concentrated cloud infrastructure.

As open payments and digital infrastructure scale, AI agents move from pilots into production and execute tasks with administrator-level privileges.

Traditional network perimeters prove insufficient, and 'silent AI risk' begins to seep into legacy general liability or professional indemnity policies that were not designed or priced for it.

New cover for probabilistic systems

A specialist cohort is building products to address these gaps across underwriting, wording and performance assurance.

The report highlights Munich Re, which pioneers AI performance guarantees, and newer firms such as Testudo and Armilla which target third-party liability for AI deployers.

Their challenge is fundamental. AI is probabilistic rather than deterministic, which alters how causality, performance and responsibility are assessed.

If an AI tool makes a discriminatory hiring decision or a chatbot issues legally consequential misinformation, liability can fall on the deploying organisation rather than the developer.

Stoïk, based in Paris, France, closed a US$21.7m (€20m) Series C in January 2026 to scale a platform that combines cyber insurance with active risk prevention and in-house incident response.

The company acts as an outsourced Chief Information Security Officer for SMEs, aligning its economics with client outcomes.

Its use of AI agents automates triage and surfaces vulnerabilities before they escalate into claims.

This integrated approach connects coverage with continuous controls, reducing frequency and severity while improving resilience

Rethinking evaluation for real-world loss

A major bottleneck remains the inadequacy of prevailing AI evaluation methods for underwriting and pricing.

Freddie Scarratt, Global Deputy Head of InsurTech at Gallagher Re, says: “The accumulation of silent AI risk represents a fundamental threat to underwriting discipline – it creates a scenario where insurers are providing ‘accidental’ capacity for complex, high-stakes events they have neither modelled nor priced.”

Gallagher Re warns that empirical benchmarks on static datasets are poor proxies for real-world loss.

For a credible AI insurance market to scale, evaluation must shift to behavioural testing that reflects adversarial pressure, operational drift and messy live data.