Insurance M&A Slumps in 2023, Europe Poised for 2024 Rebound

Insurance mergers and acquisitions (M&A) globally witnessed a significant decline in 2023, with completed deals dropping from 449 to 346, according to Clyde & Co.'s latest Insurance Growth Report. The downturn, attributed to geopolitical and economic uncertainties, marked the lowest M&A activity in a decade.

Peter Hodgins, Clyde & Co. partner in Dubai, explained, "High inflation and challenging funding for transactions, coupled with global geopolitical risks, kept deal-makers in a wait-and-see mode, impacting overall transaction volume in 2023."

The Americas retained its lead in M&A activity, although Europe closed the gap, experiencing a 22.9 percent increase in deals in the second half of 2023. The Asia Pacific and Middle East and Africa regions saw notable declines of 20.7 percent and 33.3 percent, respectively, in the same period.

Europe's increase in the latter half of 2023, combined with anticipated central bank interest rate cuts, fuels optimism for a rebound in 2024. Eva-Maria Barbosa, Clyde & Co. partner in Munich, noted, "Global [insurers] are looking to acquire specific business lines in the European insurance market, focusing on high-volume, low-premium contracts."

Geopolitical risks are a key factor in 2023, with conflicts in Europe and the Middle East and Africa, along with upcoming elections, influencing business decisions. Despite potential limitations on expansion, insurers are expected to play a crucial role in providing support as businesses navigate geopolitical risks.

Digital assets, particularly cryptocurrencies, emerge as alternative growth avenues for insurers. Liam Hennessy, Clyde & Co. partner in Brisbane, highlighted the growing demand for digital assets and the adoption of blockchain technology within the insurance sector.

Looking ahead, Clyde & Co. expresses cautious optimism, foreseeing a turnaround in deal activity throughout 2024, with Europe leading the recovery. Larger broking players in the United States are eyeing acquisitions, and international interest in the Gulf Corporation Council region is resurging, with international brokers looking to acquire businesses in the UAE and Saudi Arabia.

Mr. Hodgins emphasized, "Despite potential market volatility, insurers view the current environment as 'the new normal,' and we expect them to become less cautious regarding M&A in the coming 12 months."