Last year was the fourth-busiest for mergers and acquisitions (M&A) within the global insurance industry, with the pandemic encouraging companies to seek alternative routes to growth.
That is according to the latest edition of global law firm Clyde & Co’s Insurance Growth Report, which shows that there were 418 completed deals last year, up from 407 in 2020.
M&A activity was led by the US, where the number of completed transactions reached 180 for the year – the highest total for the country since 2015. Deals in Europe were up 21% year-on-year, buoyed by a stand-out second half of 2021, which saw 74 transactions, up from 51 in the first six months.
However, the Asia Pacific saw a 44% drop in activity from 75 deals in 2020 down to 42 in 2021, while the Middle East and Africa also experienced a similar trend, with 17 deals representing a 47% decrease on the previous year.
The researchers said that the pandemic has accelerated innovation in the industry, with re/insurers prepared to buy, fund or partner with the technology companies that can help provide product innovation and greater agility to deliver a competitive advantage.
Furthermore, InsurTechs are growing at pace, particularly in the US, with some reaching a stage of maturity that is allowing them to look at acquisitions themselves on the path to greater size and market share.
“Investment flowing into the InsurTech space keeps growing strongly,” said Vikram Sidhu, Clyde & Co partner in New York.
“The successful InsurTechs are at a place where, for various reasons, they want to have that ‘full stack’ insurance business, rather than simply being managing general agents that sell policies on behalf of other carriers. These companies want to grow bigger and control their destiny.”
Beyond M&A as a route to growth, new business models are emerging that will allow re/insurers to not only expand their operations, but also improve the customer journey, according to the report.
While the insurance sector is firmly on the path to digitalisation following the move to remote working, growth in innovations such as automation, data analytics and modelling are now key to re/insurers targeting expansion.
Looking forward to 2022, the report forecasts M&A deal activity to remain buoyant, with more than 200 completed deals expected worldwide in the first half of 2022, rising above 220 in the final six months of the year.
Joyce Chan, Clyde & Co Partner in Hong Kong, said: “We are likely to see re/insurers positioning themselves for a more growth-oriented environment in the coming year, albeit with some regional variations.
“Despite continued interest from strategic buyers and private equity, a continued lack of suitable acquisition targets in markets like Europe and Asia will be a feature. However, the MENA region is expected to see a burgeoning M&A market this year, with more activity in GCC countries than has historically been the case.
“As the more mature InsurTechs in the US look for acquisition targets, others will look for opportunities to establish or expand their foothold in the insurance market, driven by high levels of deployable capital.”
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Author: Chris Seekings