Wave of M&A activity expected to hit Singapore and Hong Kong in 2024 – Clearwater Analytics

Larger organisations optimistic in acquisition activities

Wave of M&A activity expected to hit Singapore and Hong Kong in 2024 – Clearwater Analytics

Insurance News

By Kenneth Araullo

As 2024 approaches, Clearwater Analytics has conducted a survey among decision-makers in the insurance industry in Hong Kong and Singapore, focusing on key trends expected to shape the sector in 2024. The survey covered topics such as mergers and acquisitions and regulatory developments in the region.

The survey reveals a strong expectation of increased M&A activity in Singapore and Hong Kong for 2024, reflecting the global trend towards consolidation in the insurance industry. A significant 65% of respondents anticipate a rise in M&A activities within their domestic markets.

Notably, larger organisations, with assets under management (AUM) over US$100 billion, show greater optimism (68%) compared to smaller firms with less than US$1 billion AUM (58%). This suggests that larger entities are likely to be key drivers in acquisition activities.

In Singapore, despite a relatively flat insurance broker M&A market in 2023, 63% of insurers and insurance asset managers expect a surge in domestic M&A activities in 2024, indicating a potential release of pent-up deals.

Regulatory developments in the region

Regarding regulatory changes, the Monetary Authority of Singapore (MAS) recently classified four major insurers as “too big to fail,” increasing regulatory scrutiny on them. Decision-makers were asked about strategies to ensure insurers in Singapore and Hong Kong do not pose broader market risks through insolvencies. While there was no dominant preferred approach, increased regulatory requirements were the most cited answer (27%), particularly among smaller firms (< US$1 billion AUM), who overwhelmingly supported this view (50%).

C-suite executives favoured demonstrating lower investment risk appetites in portfolio allocations as a risk minimisation strategy (54%). The report also delves into the firms' investing strategies and associated operational complexities.

Around 20% of respondents suggested that heightened automation within insurers could improve operational efficiency and accuracy, while 36% of the largest insurers (> US$100 billion AUM) advocated for stricter capital control measures.

Respondents also highlighted challenges in adapting to regulatory changes, with 30% indicating this as their primary concern. Meeting internal and external reporting demands was another significant challenge (28%). Larger organisations, particularly in the US$50 to U$100 billion AUM bracket, expressed heightened concerns about tracking and adapting to regulatory changes (43%).

Other challenges included meeting varying requirements across different regimes (23%) and accessing timely and accurate data (14%).

With Hong Kong's risk-based capital regime (RBC) changes expected next summer, 72% of respondents felt the local solvency rules were competitive compared to other regions. However, 30% believed improvements were needed, citing issues such as limitations on investment strategies (10%), attracting regional clients (10%), and insufficient safeguards against potential insolvencies (10%).

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