The number of insurance mergers and acquisitions across the globe plummeted in the first half of 2023, according to global law firm Clyde & Co's Insurance Growth Report mid-year update.
The report revealed that the number of completed M&A deals in the global insurance industry decreased from 242 completed deals in the first half of 2022 (H1 2022) and 207 in the second half of 2022 (H2 2022) to 171 in the first half of 2023 (H1 2023).
Among the regions, the Americas had the most evident drop in insurance M&A activity, with only 79 completed deals in H1 2023 (down from 104 in H2 2002) and M&A in the region falling to its lowest level since 2014.
Europe had only 47 completed deals in H1 2023, the region's lowest level for over a decade. Asia Pacific's completed deals totalled 29 in the same period but saw a spread of transactions across the region.
The Middle East and Africa was the only region with an increased number of M&A activity in H1 2023, with nine completed deals compared to eight in the previous six months.
Clyde & Co's report identified diminishing appetite in some regions for insurtech businesses as one of the main factors impacting the overall drop in M&A transactions in H1 2023.
In Europe, finding capital for insurtech businesses was difficult in H1 2023 due to the continuing inflation and rising interest rates. Meanwhile, the US had a lack of “true insurtechs” entering the market. However, some regions' interest in insurtech businesses remained strong in H1 2023, including Latin America and Asia.
“Private equity firms are looking at investing in some of the Asia tech players around the region, at all stages of development, with prospective capital providers evenly split between international PE firms and regional asset managers. Meanwhile, as the use of AI in insurance becomes better established, investment is likely to return to insurtech in other regions – as the sector best-placed to leverage the emerging technology,” said Joyce Chan, partner at Clyde & Co in Hong Kong.
Eva-Maria Barbosa, partner at Clyde & Co in Munich, expects the lull in insurance M&A to be short-lived.
“Despite ongoing geopolitical and economic uncertainty, insurance businesses are adopting a ‘Keep Calm and Carry On’ approach. Carriers are less dependent on bank financing for strategic transactions as they are restricted to leveraging a smaller proportion of the transaction anyway. With insurers typically balance sheet-heavy at present, the break in carrier M&A activity is likely to be over. Meanwhile, private equity capital is returning to the market for broker deals,” Barbosa said.
