Last month, POP Holdings Group, an insurtech conglomerate, launched in Australia what it called the world’s first online mergers and acquisitions (M&A) insurance marketplace for SMEs.
Killian McDermott (pictured), io.insure’s co-founder and executive partner, said his platform can deliver an M&A policy within 24 hours.
Until now, the process, much of it still manual, could take weeks. McDermott said the major motivation for launching in Australia was the huge demand for M&A insurance.
According to the latest Insurance Growth Report from law firm Clyde & Co, M&A activity globally continued to rise in 2021.
“As anticipated, the volume of insurance M&A activity worldwide picked up notably in 2021,” said Ivor Edwards, head of Clyde & Co’s European Corporate Insurance Group.
The Americas remained the most active region for M&A, accounting for over half of the global total for 2021 - posting 224 deals during the year, an increase of 17%.
However, does what is likely the first serious digitisation of the M&A insurance space pose a threat to brokers?
“It’s a very good question. We are constantly asked that question because technology solutions are synonymous with disruption,” said McDermott.
The io.insure co-founder argued that, from a broker perspective, his online marketplace should be seen as an enhancement.
“It’s an enhancement that we believe serves first and foremost the SMEs of the world and those doing SME transactions,” he said. “But as a marketplace it also actually serves the brokers, the advisors and other insurers as well. So, it serves the whole M&A insurance ecosystem,” said McDermott.
“You know, some people say, ‘Is this disintermediation?’ But it’s not because the brokers are welcomed and invited as partners on to this marketplace,” he said.
McDermott said the platform provides brokers with an online tool they haven’t had until now.
“From our perspective we have a lot of time and respect for our broker partners,” he added.
McDermott also anticipates a lot of business because his product can ease two problems in the M&A insurance sector: a lack of insurance capital and a lack of human capital.
“For the SME segment it’s also that the insurance capital isn’t being directed into that segment, it’s been focused on larger transactions,” he said.
However, across the whole M&A sector, he said, there’s a more serious lack of human capital. He believes a lack of personnel is impacting the smaller M&A transactions involving SMEs right up to the big deals worth hundreds of millions of dollars.
“I was talking to underwriters in the US and there was one example of an insurer that had 720 submissions in the last month, and they had to decline 80% of them because they just don’t have the underwriters to do them,” said McDermott.
He added that the launching of the online marketplace represented a solution to these issues.
“What I would see happening is that not only is our platform going to be used in the SME segment but there’s the possibility of using the platform right up the value chain over time to build efficiencies in order to be able to deal with that lack of supply of available underwriters,” said McDermott.
He said his platform can offer “hybrid solutions” where the SME product will be a more automated, standard insurance product but for the larger transactions will have more manual intervention.
“So, for the online SME solution right now you might have two turns of the policy and you use a certain workflow,” he said.
The same workflow can be used for the larger transactions, he said, but they might need more turns of the policy.
“So there’s more manual intervention but you still build efficiencies using the platform because you don’t have as much paperwork. It’s pretty much done online,” said McDermott.
The io.insure executive partner is excited about the growth prospects in the M&A market.
“There are still a lot of transactions which are not insured. There’s still a long way to go in terms of the growth of this product,” he said.
“So, as a result, in our view, there’s only going to be so much human capital available or human expertise available so it begs for a technology solution right across the board,” said McDermott.
