Covid-19 took the wind out of insurtech industry’s sails in Q1, but the pause may be a good thing as the funding environment was unsustainable.

About $912 million was invested into the sector in Q1 across 96 deals, according to numbers from CB Insights and Willis Towers Watson. Q1 funding was down 54 percent quarter over quarter compared to the record setting $1.98 billion across 75 deals posted in Q4 2019.

While analysts were predicting the current robust funding environment would have to come to an end at some point because the current funding model isn’t viable in the longterm, they weren’t sure when that inflection point would come, Andrew Johnson, the global head of insurtech at Willis RE said.

“We aren’t making the pie much bigger, it’s an unsustainable model,” Johnson said. “The amount of funding going into [the sector] in 2019 was not sustainable. It just doesn’t add up. The valuations are driven by the expectations that there will be a handful of winners worth a lot of money.”

While the numbers don’t pinpoint exactly how much of Q1’s funding drop was attributed to the covid-19 pandemic, the timeline pretty much does.

The quarter started with the same fire power as 2019. About $450 million was invested by the first week of February, but it took the rest of the quarter to double that amount.

“Q1 would have been the largest quarter to date,” Johnson said. “You can see when covid-19 has a material impact and investment basically tails off. I’m not brave enough to say which quarter would have been the apex if covid-19 hadn’t happened, but I’m confident Q1 would have been bigger than Q4.”

Part of the decline last quarter is due to the high number of incumbent insurance companies that invest in late-stage pulling back when markets began to froth because of the virus.

Series C rounds and later only took 10 percent of the deals in Q1 with one single deal worth $100 million and nothing larger. In Q4 the largest deal was a $635 million round into Bright Health.

Policygenius closed a $100 million Series D round in late-January that was lead by KKR and Norwest Venture Partners with participation from AXA Venture Partners and MassMutual Ventures, among others.

Only six deals were worth $40 million or over in Q1, which accounted for 42 percent of the funding. This is down 45 percent from Q4 as the late-stage insurtech market essentially dried up.

Seed and early-stage deals made up 51 percent of the deals in Q1 and accounted for $223 million of the funding.

Property and casualty insurance start-ups grabbed 75 percent of the deal count with 72 transactions, compared to 24 in life and health, which showcases a gap in the market that keeps widening.

The majority of deals, 57 percent, took place in the US, which could also be partially driven by the timing of the virus, but Johnson said it also may be caused by one of industry’s qualms.

“The vast majority of [insurtech companies] have not made it any easier for insurers or reinsurers to enter new markets,” Johnson said. “Most have been rehashing existing markets, existing products, with no desire to go into underserved markets.”

Johnson adds its unclear if the coronavirus is enough to diversify the path of the insurtech industry or help cool the astronomical funding numbers and valuations  or if the industry will just resume its fever as the virus passes.

He said he already knows of four large raises in Q2, three of which would be bigger than any deal completed in Q1. May has already seen a handful of deals close across stages, making the future of funding in the industry harder to predict.

At the end of May, Clara Insurance, a start-up that helps financially support people after a health crisis, raised a $5.5 million seed round. The funding was led by Two Sigma Ventures and had participation from SixThirty, SymphonyAI and Founder Collective, among others.

Cyber insurance company, Coalition grabbed $90 million from Valor Equity Partners, Felicis Ventures and Greyhound Capital, also in May.