Insurers search for growth reveals that there were 387 deals last year, compared with 444 in 2015, with the second half of 2016 resulting in just 186 transactions – the quietest six months for three years – compared to 201 seen in the first half.
The lower level of activity is thought to reflect high levels of political uncertainty, and a pause as the market absorbed a number of megadeals and transformational acquisitions from the previous year.
Clyde & Co corporate insurance global head, Andrew Holderness, said: “Last year didn't match what was, in retrospect, a bumper year in 2015. Market conditions for insurance businesses have not improved during the last 12 months and if anything have got worse, particularly in the last six months.
“We remain in a period of political and economic uncertainty stemming from Brexit and the new US administration. In this environment it is difficult to tread water and stay afloat, let alone move ahead of the competition by delivering the growth that shareholders expect.”
The number of insurance M&A deals completed globally between 2009 and 2016 is shown below:
In Europe, it is expected that the Brexit vote will result in larger UK-based insurers setting up subsidiaries in the EU, while at the other end of the spectrum, smaller businesses might become available if they find it too difficult to continue operations on their own.
Asia bucked the trend last year, with 60% of the top 20 M&A deals involving an acquirer from the region, however regulatory moves in China might slow this, with the biggest stake a single shareholder can take in an insurance firm being reduced from 51% to 33%.
However, opposite regulatory changes have been introduced in countries such as India, with 49% now the maximum stake permitted for joint ventures, up from 26%, creating huge potential for growth, according to the report.
It predicts that increased competition, difficult operating environments, protectionism, and technology could all lead to increased M&A activity over the coming years.
"With competition to leverage opportunities showing no sign of diminishing, and tough market conditions expected to continue for the foreseeable future, there is no doubt that insurance businesses around the world will continue to look at all available avenues in the search for growth,” Holderness concluded. Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession