Global insurance M&A drops ‘sharply’ in H1: Clyde & Co

Mergers and acquisitions (M&A) in the global insurance industry dropped “sharply” by 17% in the first half this year to 171 from 207 in H2 2022, according to Clyde & Co. Its Insurance Growth Report mid-year update shows that the number of M&As is down from 242 in the same period of last year. But Clyde & Co is “cautiously optimistic” that M&As will pick up in the second half of 2023. “While deal volume is not expected to return to the highs of 2022 in the immediate future, M&A activity is expected to rebound in the second half of the year,” it said. The Americas saw the biggest drop-off in M&A activity in the first half, down 24% to 79 from 104 in H2 2022. This is the lowest half-year number since 2014 but the Americas still saw more deals than any other region. Insurance M&A activity in Europe was at its lowest for more than a decade with 47 deals, a drop of 21.6% on the second half of last year. The UK was the leading European country for M&As on 11, ahead of France and Germany, but dropped to fourth place globally behind the US, Canada and Japan. Completed M&As were down 12.1% in APAC to 29 in H1 2023. Japan saw 14 deals, ahead of Australia, China, Hong Kong and South Korea with three each. The Middle East and Africa was the only region to see an increase in M&A in the first half, with nine completed deals compared to eight in the previous six months. Eva-Maria Barbosa, partner at Clyde & Co in Munich, said: “The lull in insurer M&A will be short-lived. Despite ongoing geopolitical and economic uncertainty, insurance businesses are adopting a ‘Keep Calm and Carry On’ approach. Carriers are less dependent on bank financing for strategic transactions as they are restricted to leveraging a smaller proportion of the transaction anyway. With insurers typically balance sheet-heavy at present, the break in carrier M&A activity is likely to be over. Meanwhile, private equity capital is returning to the market for broker deals.” “Given that growth in M&A activity typically lags behind improvements in underlying market conditions by anywhere from eight to 12 months, the dip in completed transactions over the last six months is unsurprising. We anticipate that the volume of transactions will start to rise again towards the end of 2023 as insurance businesses acclimatise to the new operating environment, with the broker segment leading the way,” she added. Clyde said diminishing appetite in some regions for insurtech businesses has been one factor in the overall drop in M&A activity. It said finding capital for insurtech businesses is proving difficult in Europe due to continuing inflation and rising interest rates, while the US has been impacted by a lack of true insurtechs coming to market. However, the law firm noted that interest in insurtech elsewhere remains strong. Joyce Chan, partner at Clyde & Co in Hong Kong, said: “Private equity firms are looking at investing in some of the Asia tech players around the region, at all stages of development, with prospective capital providers fairly evenly split between international PE firms and regional asset managers. Meanwhile, as the use of AI in insurance becomes better established, investment is likely to return to insurtech in other regions – as the sector best-placed to leverage the emerging technology.”

Global insurance M&A drops ‘sharply’ in H1: Clyde & Co

Want to read this article?

Read Next

CSDDD a ‘milestone for responsible business conduct’

Shifting climate litigation against corporates and D&Os ripe for growth

New Africa-focused syndicate launched at Lloyd’s

WTW and Riskonnect partner on risk diagnostic tool

AM Best upgrades outlook for UK market and expects further rate hardening

CSDDD a ‘milestone for responsible business conduct’

Shifting climate litigation against corporates and D&Os ripe for growth

New Africa-focused syndicate launched at Lloyd’s

WTW and Riskonnect partner on risk diagnostic tool

AM Best upgrades outlook for UK market and expects further rate hardening

Want to read this article?

Read Next

CSDDD a ‘milestone for responsible business conduct’

Shifting climate litigation against corporates and D&Os ripe for growth

New Africa-focused syndicate launched at Lloyd’s

WTW and Riskonnect partner on risk diagnostic tool

AM Best upgrades outlook for UK market and expects further rate hardening

Related Articles