Brexit to limit insurance M&A in Europe - AM Best

The UK’s withdrawal from the European Union, combined with the political uncertainty brought about by two country elections, will reduce M&A deals in the region, according to ratings agency AM Best.

 

In a new report on Monday, AM Best raised doubts that insurance mergers in Europe in 2017 will match the M&A activities of previous years.

 

“What with Brexit and the political uncertainties on the map, it doesn’t feel that we are going to hit the peaks of 2014 and 2015 (in 2017),” AM Best senior financial analyst Anthony Silverman was quoted as saying in a Reuters report.

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According to AM Best, mergers between two insurance firms in the same European country will also become less common this year.

 

“The scope for large transactions within a European country is likely to eventually become limited by competition considerations,” the agency said.

 

From 2012 to 2016, the agency recorded US$64 billion worth of insurance M&A deals in Europe. Last year, mergers that involved at least one insurer amounted to US$5 billion, down by 72% and 76% from 2015 and 2014, respectively.

 

AM Best cited negative interest rates and economic uncertainties in some European countries, along with the weakening of the British pound, as among the reasons for the decline in insurance M&A in Europe.

 

Political and economic instabilities are expected to prevail on the continent as France and Germany hold elections while the UK has officially started its two-year Brexit negotiations.