Global insurance M&A activity rises further in H1

Mergers and acquisitions (M&A) in the global insurance industry rose in the first half of 2018 with 186 completed deals worldwide, up from 180 in the second half of 2017, according to Clyde & Co’s Insurance Growth Report mid-year update.

This marks the second consecutive six-month period of modest increases in the volume of transactions since the low point in the first half of 2017 that followed two years of steady decline, the report said.

Activity in the Americas was up, with 97 deals in the first half of 2018 compared to 90 in the preceding six months, with the strengthening economic outlook a key driver in the US, in addition to shifting reinsurance market fundamentals in Bermuda.

Asia Pacific saw an uptick in deals from 20 to 25 with Japanese acquirers accounting for the lion’s share, ahead of Australia and Taiwan. Activity in the Middle East and Africa remains subdued with just four deals in the first quarter of 2018, slightly up on the three completed in the previous six months. Europe was the only region to see a decline in M&A with 59 deals, down from 65 in second half of 2017, with the overhanging uncertainty around Brexit continuing to act as a brake on activity.

“After a sustained period of sliding M&A volumes that bottomed out in the first half of 2017, the first green shoots of recovery that we saw at the turn of the year are now taking root,” said Andrew Holderness, Clyde & Co head of corporate insurance. “The characteristics of the operating environment haven’t changed – the market remains uber-competitive and generating growth a perennial challenge – so M&A can provide potential synergies on reducing the cost base, build scale and access new customers. Deal-makers are feeling renewed confidence, buoyed by strengthening economies in the US and Asia, greater regulatory certainty in China and the Middle East, and the need to pick up the pace in Europe as the risk of a chaotic Brexit looms large.”

In reinsurance, there have been a number of completed outbound deals involving Bermudan acquirers in the first half of the year as well as announcements of takeovers of Bermudan reinsurers such as AXA’s move on XL Catlin and AIG’s tie-up with Validus with an expectation of more M&A to follow.

“There is a seismic shift underway in the reinsurance market,” Holderness said.”It is proving increasingly difficult to remain relevant as a large monoline reinsurer and as a result Bermudan businesses continue to be put up for sale or look to diversify by acquiring new underwriting assets themselves. In jurisdictions around the world large reinsurers are striving to get closer to their customers by increasing their footprint in the primary market either organically or through acquisition. Carriers are looking to write risks at every level, be it from the direct side, reinsurance or retro­cession and for that they need sufficient scale and balance sheet strength.”

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