M&A in insurance market
Deloitte has presented new trends in insurance mergers and acquisitions for 2024–2025, focusing on how economic, regulatory, and strategic factors might shape the future insurance sector.
M&A in life insurance and annuity market
A slowdown in life insurance and annuity premium sales, paired with a premium outflow issue, means insurers should think about how they reposition themselves.
Insurance companies may increasingly shift from life and annuity (L&A) products to investment and wealth management services.
Public insurers could opt for divestitures to mitigate the financial impact of new “long-duration targeted improvements” accounting standards. These standards affect the accounting of long-term insurance contracts.
By divesting parts of their business, companies can better manage their finances under the new regulations.
This trend could create opportunities for other entities to acquire these insurance business segments at lower prices, potentially yielding significant economic returns or enhancing market presence.
Some L&A companies have been offering pension buyouts or pension risk transfers, assuming the longevity risk of other firms’ defined benefit pension plans. The resulting asset mix might make these insurers more attractive acquisition targets.
M&A in P&C insurance market
Turning to the property and casualty (P&C) insurance market, property catastrophe rates have been going up.
Some insurance companies may seek scale in the reinsurance market, while others might capitalize on the high-interest rate environment. Additionally, some may choose to exit the market altogether.
This trend raises concerns, especially if climate-related perils intensify and become more frequent, potentially leading to increased capital requirements for property and casualty (P&C) insurers from regulators.
Regulatory pressure could drive further consolidation within the industry, as insurers aim to strengthen their balance sheets and strategically determine their future business operations, adapting to rising risks and financial demands.
Private equity investors looking for new opportunities
As the broader market pulls away from certain risk classes, expect some carriers with creative, flexible solutions tailored to specific risk profiles. This may draw interest from private equity investors looking for opportunities that are capital light and bring less risk than traditional lines.
Private equity firms are looking at investing in some of the Asia players around the region, at all stages of development, with prospective capital providers fairly evenly split between international PE firms and regional asset managers
According to Insurance M&A Deals Outlook, in the face of stark economic pressures — inflation, rising energy costs, and looming recession — insurers remain focused on growth opportunities. The volume of M&A in the global insurance industry reached its highest rate of growth for ten years, up 9.5% in 2023.
Global private equity and venture capital deal value grew in the first quarter, although the volume of transactions declined from the same period in 2023. Deal value climbed 5.1% to $130.61 billion for the first three months of 2024 from $124.30 billion for the same period in 2023.
The number of deals slid 12.8% year over year to 2,880 as of quarter-end, according to S&P Global Market Intelligence.
A number of factors are driving deals. Private equity (PE) firms and asset managers are still keen to explore either entry into the insurance market or expansion of existing footprints.
Flagging insurtech valuations mean acquisitions are increasingly attractive to both PE investors and traditional carriers seeking to increase technological capabilities.
And rising interest rates promise better investment returns for long duration businesses, while helping insurers to rebalance portfolios (see 11 Types of Merger & Acquisition).
The insurance brokerage market
The insurance brokerage market is likely to remain fiercely competitive, with private equity firms and corporate buyers actively vying for acquisitions.
Expect the market to stay competitive as private equity goes head-to-head with corporate buyers looking to grow through M&A with brokerages in the middle market.
Many private equity investors will likely continue to aggregate smaller brokerages. Large brokerage houses will likely continue to see where they can consolidate and expand their footprint in the middle market.
While the Beinsure Media survey focuses on the carrier space, it is worth noting that there is also significant M&A activity in insurance distribution, with PE interest driving an increase in broker consolidation and expansion, across the US, Europe, MEA and Australia (see 4 stages of M&A deals).
