Global insurance M&As dip but Singapore ‘remains attractive’

Number of M&As in insurance across the globe falls from its three-year high but the market is expected to remain steady with Singapore remaining an ‘attractive’ target

Insurance News

By Jordan Lynn

The number of mergers and acquisitions in the insurance industry has dipped from its three-year high but the market is expected to remain steady, according to analysis from law firm Clyde & Co.

In the Search for Growth Report, Clyde & Co noted 173 deals in the period from October 2015 to March 2016, down from 250 in the previous six months.

Ian Stewart, partner at Clyde & Co’s SIngapore branch, told Insurance Business that the dip in deals is a result of “the challenge of finding attractive targets at the right price.”

“Specifically, the differing views of buyers and sellers in relation to the valuation of target companies in the region, with sellers looking to build in a significant premium in respect of the long term growth potential for Asian based companies, with buyers focussed more on current and historical performance,” Stewart continued. 

“As a result of this misalignment, we are seeing insurers and reinsurers looking at alternative strategies including establishing new licensed entities and a range of other operational models.”

Stewart said that global M&A activity will “remain steady” and that the Singapore market will remain “attractive” thanks to several key aspects.

“I expect that M&A activity will remain steady. Attractive targets still exist, however they are becoming more difficult to find,” Stewart noted.

“Singapore remains attractive because it is a well established insurance market and investors have confidence in the regulatory regime overseen by the Monetary Authority of Singapore. 

“It has ready access to a well qualified and experienced work force, both local and international. 

“And perhaps most significantly, it remains an industry leader within the newly forged ASEAN Economic Community, a regional grouping that has the potential to generate significant further growth opportunities in the coming years.”

The Clyde & Co report stressed that insurance businesses the world over may now be looking towards technology as a new way to grow their businesses and Stewart said that the emergence of new technology opens interesting doors for the industry.

“The impact of technological disruption and innovation may well create new and exciting M&A opportunities,” Stewart continued.

“In Singapore, the Monetary Authority of Singapore is actively encouraging financial institutions to develop and implement new technologies, and is currently exploring the establishment of a Fintech Sandbox that would allow financial institutions to roll out new technological innovations in a controlled environment subject to modified regulatory requirements. 

“This has the potential to fast track the development of new business models which could radically alter the local M&A landscape in the coming years.”

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