The global insurance industry saw a significant increase in merger and acquisition deals last year, according to the latest report by business intelligence firm Timetric.
The new research found that a growing number of high-value deals led to a 176% rise in total deal values from US$74.2 billion in 2014 to US$204.5 billion in 2015.
Driving forces behind the increased M&A activity include low interest rates, regulatory developments, changing customer preferences, the availability of surplus capital and technological advances.
“Challenging economic and market conditions are impacting all insurance operators, including brokers and service providers, and depressed premium growth and low investment returns are forcing insurers to engage in M&A activity,” the report said.
The report explained that insurers’ overall revenues and profitability have been constrained by persistent low interest rates, particularly in developed economies. This has encouraged re/insurers to streamline their operations and investment portfolios and divest non-core businesses.
Timetric’s report expects the rise in M&A insurance deals to continue until 2017, although at a slower pace.
Outbound deals from North America and Europe to emerging high-growth markets are seen to grow in number. Asia, Africa and Latin America will keep attracting international insurers that wish to expand while companies from Japan and China will still be on the hunt for overseas assets.
According to the report, insurance broking continues to attract private equity investors with a number of deals. M&A transactions for run-off portfolios, particularly in the US and Europe, are also expected to surge.
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