Insurance M&A speeds up driven by scale, geographic reach

The second half of 2017 showed an uptick in insurance M&A deals globally for the first time since 2015 and was followed by a number of high profile transactions in 2018.

The number of deals increased 5.9 percent to 180 globally in the second half of 2017 compared to the first half, according to Clyde & Co’s latest annual Insurance Growth Report.

“After a lacklustre couple of years for transactions, this rise in activity indicates a renewed level of confidence in deal-making as a tried-and-tested route to growth,” said Andrew Holderness, Clyde & Co, global head of corporate insurance.

"Following on from the uptick at the end of last year, deal making has already got off to a quick start in 2018, with a number of high profile deals announced, including those involving AIG/Validus and AXA/XL Group,” Holderness added.

"We expect this momentum to continue with M&A returning to form as insurance businesses seek to build scale and geographic reach, generate efficiencies and deploy innovative technologies to access new customers with new products through new channels. Alongside M&A, insurtech is poised to become a mainstream driver for growth in the insurance sector.”

The Americas, specifically the US, led the way as the most active region for insurance M&A transactions in 2017, increasing from 80 deals in H1 to 96 in H2. Recent tax changes have the potential to generate a spate of deals involving both US targets and acquirers.

Bermudian assets are also proving attractive with two of 2017’s five largest transactions involving Bermudian targets: Endurance’s acquisition by Sompo for $6.3 billion and Ironshore’s acquisition by Liberty Mutual for $2.9 billion.

Clyde & Co Partner Vikram Sidhu, said: "Many Bermuda-based companies face low growth, deteriorating margins and cost pressures. In parallel, US tax changes have diminished a key advantage for Bermuda insurers and reinsurers. That’s going to lead to greater deal activity involving Bermudian businesses in 2018.”

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