Global M&A dips, insurers search for growth

After a spate of announcements of large mergers and acquisitions (M&A) in the early part of last year, the number of completed M&A transactions in the insurance industry worldwide has fallen from its three-year high point in the first half of 2015. According to Clyde & Co’s Search for Growth Report released recently, there were 173 deals in the period from October 2015 to March 2016, down from 250 in the previous six months. While M&A remains one route to growth, insurers are also considering alternatives such as establishing businesses in new markets, widening their portfolios and deploying technology solutions.

Andrew Holderness, global head of the Corporate Insurance Group, said: “Many carriers and brokers alike talk about looking at a whole range of solutions in their search for growth, and M&A is certainly a route for companies looking for consolidation, diversification and geographic reach. The recent vote by the UK to leave the European Union also means that, in Europe, there will be a sustained period of uncertainty. As a result, some businesses may well want to consider some transactional activity to create a platform within the EU so that they can continue to access business that will disappear if passporting rights are rescinded.

“While the appeal of M&A is clear, the challenges of finding the right target and, significantly, at the right price, may cause insurance businesses to consider other routes for growth. New markets are obviously appealing. In Singapore, for example, we have seen an increase in interest from international re/insurers looking to set up shop and establish a base for wider access to markets across the region. Likewise, Miami is emerging as a regional hub for Latin American and Caribbean re/insurance business – attracting a number of international players who are drawn to the city’s deep connections with, and accessibility to, the region.

“Another development over the year has been investment by a number of larger insurers into technology start-ups as a means of securing future growth. According to recent data from Accenture, insurance technology start-ups attracted USD2.6 billion of investment in 2015, up sharply from USD800 million the year before,” he added.