Uncertainty around Brexit and the economy, as well as a high level of regulation, are partly behind the slump in insurance M&A activity in the UK – though the picture here is broadly similar to the trend for slowdown globally.
“Part of what’s happening in the UK is just a reflection of what’s happening globally,” Andrew Holderness, Clyde & Co Corporate Insurance Group global head, told Insurance Business in an interview. A report from the law firm released last week revealed that the global volume of completed M&As among insurance companies
has hit a two-year low.
In the UK, a soft market with a high level of capital and lots of people wanting to do business has created a very competitive environment, Holderness explained. But fears around the effect of Brexit on the economy are also playing a part.
Just last week, Bank of England governor Mark Carney warned that business investment was slower than it would have been expected to be because of Brexit.
“It's evident in our discussions across the country with businesses that uncertainties about the eventual relationship are weighing on the decisions of some businesses,” Carney said as the Bank voted to hold rates and cut growth forecasts.
While it may be too strong a word to say that people in the UK market are hesitating due to economic worries, they are at least “pausing for thought,” Holderness noted. Once there is some level of clarity on Brexit, which many hope will be in the next 18 months or so, it’s likely that fears may be assuaged and M&A activity could pick back up in the UK.
Regulation too is having an effect. While lots of other markets, such as the US, have similarly high levels of regulation, those coming from markets outside of that may be put off somewhat by the level of intrusion that UK regulators “quite rightly” impose, Holderness commented.
Ultimately, while there has been a slowdown in M&As, the effect on the industry itself is minimal. “It’s essentially a reshuffling of the cards,” adds Holderness.
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