M&A deals decline despite Asian expansion and insurtech investments
The number of completed mergers and acquisitions (M&A) in the global insurance industry fell to 387 in 2016, 13 percent down from the 444 transactions recorded in 2015, according to a new report.
'Insurers search for growth', by law firm Clyde & Co, showed that there were only 186 transactions in the second half of the year, a marked decline from the 201 recorded in the first half of 2016.
Andrew Holderness, global head of the corporate insurance at Clyde & Co, 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. In this environment it is becoming increasingly difficult to tread water and stay afloat, let alone move ahead of the competition by delivering the growth that shareholders expect."
Outbound deal activity by Japanese insurers continued to be one of 2016’s dominant themes, as was the high level of M&A activity generally among Asian insurers.
In 2016, 12 of the top 20 completed deals by value (60 percent) involved an Asian-based acquirer, predominantly from Japan and China. However, the majority of the China-led deals were domestic transactions and the outlook for further international acquisitions in the near term is currently unclear following the decision by the China Insurance Regulatory Commission to impose stricter controls on insurance investments, including companies’ foreign assets.
The report also identified a clear focus among insurers on investing in technology with investment in insurtech start-ups reached $1.7 billion worldwide in 2016. The report quotes research that states 94 percent of insurers expect digital transformation to have the greatest impact on distribution over the next five years.
Holderness commented: "Insurance businesses are looking increasingly at how they can deploy innovative technological solutions to reduce their cost base. At the same time, technology is rapidly cementing itself as the key to accessing new customers in new markets. Although still early stages, we expect insurtech will dominate boardroom discussions in coming years."
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