Global insurance M&A at a four-year high
The volume of mergers and acquisitions (M&A) in the insurance sector increased 10 percent in 2019 with 419 deals completed worldwide, up from 382 in 2018. Activity was driven by an exceptionally strong first half of the year, led by a spike in deals in Europe that had been put on hold during Brexit preparations. Although M&A dropped back in the second half of the year, activity globally remained buoyant compared to the levels of recent years, according to Balancing Risk and Reward, the latest edition of global law firm Clyde & Co’s insurance growth report, released recently.
The Americas continued to be the most active region (182 deals in 2019), down slightly from 189 in 2018, with activity balanced between the first and second halves of the year (93 and 89 transactions respectively). Europe saw the biggest year-on-year increase with 155 deals (88 in the first half and 67 in the second), up from 122 in 2018. Asia Pacific followed a similar pattern of annual gains (17 percent overall to 69 deals), with the larger number of deals coming in H1 2019. The Middle East and Africa saw rises throughout the year, albeit from a low base.
Ivor Edwards, European head of Clyde & Co’s Corporate Insurance Group, says: “M&A has surged in the last 12 months. While insurers have had some reasons for cheer in the past year, with reduced natural catastrophe losses and price rises taking hold across a range of classes of business, investment returns are still flat. This makes deal making a trusted route to growth and a means of satisfying shareholders. Although deal makers in some markets may adopt a more cautious approach, the quick start to 2020 in certain markets suggests there’s more to come.”
M&A will be an area of focus as capacity is released following ongoing reviews by re/insurers of classes they will continue to underwrite and of where they will withdraw – this released capacity can be deployed elsewhere. At the same time, market remediation has led to more businesses being placed into run-off.
Vikram Sidhu, Clyde & Co Partner in New York, said: “Activity in the run-off market is expected to pick up further in markets across the world. In the US, insurers will likely take further steps to explore divesting legacy books of insurance business through two recently enacted restructuring mechanisms known as Insurance Business Transfers and corporate divisions, which mechanisms several states have enacted into their laws in recent years. We expect these new tools for legacy business to lead to burst of new deal activity later this year and beyond.”
