M&A Activity Increases in Insurance Sector

Merger and acquisition (M&A) activity in the global insurance sector picked up in 2014 for the first time in three years, reports law firm Clyde & Co. The firm added that solid activity in H2 saw deal momentum sustained, with a surge in the US offsetting a drop back in Europe.

As a result 2014 saw the first annual increase in transaction volume since 2011, with a 21% rise for M&As in the global insurance industry, rising from 319 transactions in 2013 to 384.

While the number of deals in H2 remained steady, with 192 transactions in each six month period, there was a marked regional shift. The US saw a sharp resurgence in deal-making as did the Middle East, while Asia Pacific remained level and Europe fell back.

“This data confirms the anecdotal evidence of the last three months that the market has reached a tipping point in terms of transactions,” said Andrew Holderness, global head of Clyde’s corporate insurance group.

“The pressure from excess capital and soft pricing has escalated to the point where those companies that cannot deliver their shareholders decent returns on their investments are under pressure to return the capital or deploy it elsewhere.

“Re/insurers have become even more active in their search for alternative strategies as size becomes increasingly important. Cedents want their reinsurers to be of a size where they can absorb earnings volatility, and the reinsurers themselves want to be as relevant as possible when it comes to renewal. So, for those with smaller market share M&A is increasingly appealing.

“Another driver of transaction activity around the world is that investors are looking for growth opportunities outside their own, often stagnant, domestic markets. This would account for the small annual increase in Asia Pacific – and the jump in the Middle East and Africa, which posted the biggest percentage gain with 25 deals in 2014, the most since 2010.

“Looking ahead there is a sense of renewed energy around transactions across the re/insurance market which has spurred the increase in the number of deals over the last 12 months. With the number of deals announced already in 2015, it is likely that this will persist.”

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Clyde Insurance MandAs fig2

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