Insurer M&A dips in 1H 2021 - Clyde & Co

Mergers and acquisitions (M&A) in the global insurance industry dropped back slightly in the first half of 2021 with 197 completed deals worldwide, down from 206 in the second half of 2020 and 201 at the same point last year, according to Clyde & Co’s Insurance Growth Report mid-year update.

Driven by robust activity in the US, the Americas led the way with 116 deals, up from 102, pushing M&A in the region to its highest level since 2015.

After a steep drop in transactions in 2020, Europe held steady in H1 2021 with 51 completed deals, up one on the previous six-month period. The UK was the leading European country – and second most active worldwide behind the US – ahead of Spain and Germany.

In contrast, Asia Pacific saw completed deals fall from 37 to 18 – the lowest level since we began this report in 2011 – as post-pandemic and geopolitical uncertainty weighed heavy on deal-makers. Japanese acquirors were again the most active compared to 2020, ahead of India and Australia.

Ivor Edwards, partner and European head of the Corporate Insurance Group at Clyde & Co, said: “Despite the challenges of the last 18 months, the insurance industry has responded well and demonstrated a remarkable degree of resilience when it comes to getting deals over the line.

”Market hardening is creating organic growth opportunities for re/insurance carriers, but the availability of cheap liquidity, active interest from private equity investors and strategic re-underwriting of portfolios at larger carriers signal that an uptick in M&A is likely.

”The extent of that increase will vary by region and investor sentiment – deal-makers in the US are comparatively bullish whereas their counterparts in Asia-Pacific remain more cautious as they wait for a more positive economic outlook.”

Although deal activity in Europe has continued steadily at a comparatively low level for a couple of years, there are signs that some of the region’s structural issues are being addressed. 

Eva-Maria Barbosa, a partner at Clyde & Co’s office in Munich, said: “Covid-19 has underlined the importance of having digital capabilities and technology remains a primary driver of M&A.

”Many start-ups have matured to the point where they have a proven business model and a robust balance sheet, which makes them very attractive to buyers.

”Meanwhile, on the flipside, the absence of sufficient technology investment on the part of a seller can be a deal breaker – potential acquirors can be put off if they think they need to spend millions to make a target company’s IT systems fit for purpose.”