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Following a relatively quiet 2017 in terms of insurance mergers and acquisitions (M&A), the Asia-Pacific region has seen a return to form in 2018, according to a report by international law firm Clyde & Co.
In the second part of its report, titled ‘Shifting sands of M&A – a regional outlook’, Clyde & Co credited the resurgence of deals partly to regulators’ actions that have spurred deals in several Asia-Pacific markets.
The report showed that there were a total of 72 insurance M&A deals in the region in 2016, with 36 for each half of the year. The figure dropped to 42 in 2017, with 22 in the first half and 20 in the second half. In 2018, the number of deals began to rise again, with 25 in the first half and 34 in the second half, for a total of 59.
China is one such market that benefited from regulatory developments, as these have opened the gates to domestic consolidation, as well as removed barriers for foreign investment. As a result, Clyde & Co expects several “interesting” deals to follow. Furthermore, Chinese re/insurers are also expanding abroad, and recent deals, such as the recent acquisition of Chaucer by China Re for US$940 million, may be a sign of things to come for the Lloyd’s and other international markets.
Meanwhile, Japanese re/insurers remained as some of the most acquisitive players in the region, with 29 deals – more than double that of second-place China, which had 14. Australia came a distant third with seven.
This trend is expected to continue in the coming years. In 2018, Tokio Marine and Sompo Holdings announced they are on the lookout for M&A targets, and both these Japanese heavyweights have the capital to undertake major transactions, the report said.
Two of the largest deals involving Japanese buyers are that of MassMutual Life Insurance Co, which was bought by Nippon Life for US$980 million and MS&AD Insurance Group Holdings’ move for ReAssure Jersey One for US$820 million.
The report identified technology as a key driver of growth across the region, adding that a number of markets in Southeast Asia offer exciting prospects for insurtech growth, such as Indonesia, Singapore and Vietnam. Vietnam is also attracting attention as an alternative manufacturing location to China. As foreign investors enter the country, insurers are expected to follow, as is the case with South Korean firms wanting to enter the Vietnamese market.
“Positive insurer sentiment around the region is driving transactions,” observed Joyce Chan, a Clyde & Co partner based in Hong Kong. “Most of the deals are not consolidations; they are international in scope as insurance groups look to build out their platforms in particular countries to access new customers and drive growth.”
