M&A in the global insurance industry dropped sharply in the first half of 2023 with 171 completed deals worldwide, down from 207 in the second half of 2022 and 242 at the same point last year, according to Clyde & Co’s Insurance Growth Report mid-year update.
The drop-off in activity was most pronounced in the Americas, which had 79 deals, down from 104 in H2 2002, as M&A in the region fell to its lowest level since 2014. The US was still the most active country worldwide with 60 completed transactions in 1H2023, down from 83 in the previous six months. With 47 deals in the first half of 2023, activity in Europe was at its lowest level for more than a decade. The UK was the leading European country in terms of deals with 11 – ahead of France and Germany – but dropped to fourth place globally behind Canada and Japan.
Asia Pacific saw completed M&A fall from 33 to 29 – but saw a spread of transactions across the region with Japan out in front with 14 deals, ahead of Australia, China, Hong Kong and South Korea with three each. The Middle East and Africa was the only region to see an increase in M&A in 1H2023, with nine completed deals compared to eight in the previous six months.
Diminishing appetite in some regions for InsurTech businesses has been one factor in the overall drop in M&A activity, said the report. In Europe, finding capital for InsurTech businesses is proving difficult due to continuing inflation and rising interest rates, while the US has been impacted by a lack of true InsurTechs coming to market. However, interest in InsurTech elsewhere, including from private equity remains strong.
While regulatory enforcement activities are putting the brakes on some insurance activity due to the increased cost of doing business, new legislation in other territories is helping to drive business opportunities. Hong Kong’s new risk-based capital regime for insurers will come into force in 2024, which could lead to a spate of transactions as those who struggle to comply look to exit certain lines of business. And in the Middle East, the growing regulatory burden will force incumbents to adopt international best practice and open M&A opportunities as the market consolidates further.
Cyber continues to rise up the leaderboard, both as a growth opportunity for carriers and a risk management concern. The potential impact of cyber exposures on M&A is a growing focus for dealmakers. M&A activity is expected to rebound in the second half of the year, the report concluded. M