In the first half of 2024, the insurance carrier M&A landscape saw 103 deals completed, the lowest seen in 15 years, according to Clyde & Co’s mid-year Growth report update.

This follows a notable decline in deal volumes throughout 2023 in response to a surge in inflation and interest rate cuts. However, since then, a variety of factors has further reduced deal activity globally to a crawl.

In H1’24, cash-rich carriers, which would traditionally have been active in the market, have been retaining capital while interest rates remain high.

According to Clyde & Co, the slow pace has been exacerbated by sellers’ high pricing expectations, combined with an increasing premium required for the integration of tech systems, as innovation widens the gap with outdated platforms.

In addition, deal dynamics are also changing with a greater emphasis being placed on securing talent.

Eva-Maria Barbosa, Partner, Clyde & Co, commented: “Insurance M&A, for the remainder of 2024 and into 2025, will likely be driven by larger scale transactions. While the total number may not increase dramatically, we are increasingly likely to see deals that span a number of jurisdictions with some of the major carriers now looking to take on books or businesses which span 8-10 countries in one swoop.”

Peter Hodgins, Partner, Clyde & Co, said: “The US election will bring us near the end of a period of exceptional political change. Interest rates are broadly tracking downwards. While acquirers are likely to become more bullish, sellers may be running out of road. Businesses that have relied on financing will look to divest non-core businesses or underperforming operations.”

Breaking it down by region, M&A activity in the UK market remained low during the first half of the year, but speculation is increasing on an uptick in M&A activity at the larger end of the capitalisation spectrum.

Whereas, the factors that have dampened carrier acquisitions globally have also been felt across Europe. Clyde & Co did note however, that the impact of lower interest rates and greater political clarity, combined with the implementation of the EU mobility directive, may wind up serving as catalysts for an increase in multi-market deals.

Switching over to the US and Canada, both countries saw the highest number of insurance underwriting deals of any region in H1’24, with 40 transactions closed, and Brookfield Reinsurance’s acquisition of American Equity Investment Life (AEL) for $3.587 billion. representing the largest deal completed globally.

As well as this, the US was also reportedly the only region to witness multiple billion-dollar sales.

Furthermore, the five deals which were completed in the first half of the year continued a trend which has been visible in the Middle East for the last five years, however local carriers are said to be strengthening their regional footprints in order to capitalise on the growth opportunities across the region.

As for Asia-Pacific (APAC), the M&A market in the region has been resilient in 2024, notes Clyde & Co. Even though deal activity is down year-on-year, this decline has been less pronounced than in the US or Europe.

Meanwhile, the global slowdown in M&A activity has also been felt in South Africa, with the macroeconomic factors of high inflation, high interest rates, and lower economic growth being the key factors.

While in South America, global players have continued to consolidate their positions across multiple geographies. Notably, HDI’s acquisition of Liberty Seguros in Chile, Colombia, and Ecuador this year, follows their takeover of Liberty’s Brazilian operations at the end of 2023.

Lastly, Clyde & Co highlighted that within the P&C space, market dynamics are also driving increased interest in specialty carriers.

“Data and technological integration have become key considerations for any insurance deal. Current conditions have largely not been conducive for significant deal activity, but they have enabled high performing businesses to plan growth strategies carefully. As we seemingly turn a corner, the path ahead may become clearer. Any revival is unlikely to be uniform globally, or move at the same pace, but conditions are improving,” Clyde & Co concludes.

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