Insurance merger and acquisition activity in the first half of 2024 hit a 15-year low for first-half figures, with just 103 deals completed, down 40% from the 171 deals seen in the same period in 2023, according to a Clyde & Co report.

The significant slowdown in the trend that began in 2023, driven by inflation, higher interest rates and higher integration costs, continued. The first half of this year marked a new low in first-half activity – the previous record was 162 deals in the first half of 2013.

Although six deals worth $6 billion were closed — three in the US, two in Asia and one in Europe — overall transaction numbers fell sharply, with cross-border transactions mostly concentrated in Europe, the Middle East and Asia.

Clyde & Co noted that cash-rich carriers have held off on deals in 2024, choosing instead to conserve capital amid high interest rates. Higher vendor price expectations and rising costs of integrating new technologies have also slowed activity further.

As the gap between legacy systems and modern platforms widens due to innovation, technology integration has become a critical and costly aspect of M&A deals. Talent acquisition is also playing a larger role in deal negotiations.

However, the Clyde & Co report suggests that the worst may be over, with conditions beginning to improve for a potential recovery.

“Insurance M&A activity over the remainder of 2024 and into 2025 is likely to be driven by large-scale transactions,” said Eva Maria Barbosa, partner at Clyde & Co.

“While the total number may not increase significantly, it is increasingly likely that we will see deals spanning a number of jurisdictions with some major carriers now looking to acquire books or businesses spanning eight to ten countries in one fell swoop.”

Fellow partner Peter Hodgins noted that the US elections due later this year could help resolve political uncertainty, potentially fuelling more deal activity.

Regionally, the UK has not seen significant M&A activity so far in 2024, despite growing speculation that larger deals could pick up. UK-listed insurers are particularly attractive targets due to their strong performance and low valuations. Smaller deals and niche acquisitions are expected in the near term.

Europe has been affected by the same factors that are stifling global insurance deals, but an improving economic outlook and political clarity could boost multi-country deals, especially with the implementation of the EU Mobility Directive.

With 40 deals completed, the U.S. and Canada led the world in M&A activity in the first half of the year. Brookfield Re’s $3.6 billion purchase of American Equity Investment Life was the largest deal globally, and the U.S. also saw multiple multibillion-dollar sales. Overall activity remains lower than usual in North America, though.

Consolidation continued in the Middle East, with five deals. Regional carriers are strengthening their positions to capitalize on local growth opportunities. While some global players have scaled back their operations, specialist international insurers are focusing on reinsurance and trade credit by setting up operations in the Dubai International Financial Centre or Abu Dhabi Global Market.

Although M&A activity in Asia-Pacific has slowed compared to previous years, the slowdown has been less severe than in the US or Europe. Large Japanese insurers continue to expand regionally, with several large cross-border deals in the face of a global downturn.

The M&A market in South Africa has been notably slow, largely due to high inflation, rising interest rates and slowing economic growth. Political uncertainty ahead of the May 2024 elections has also dampened dealmaking.

Consolidation remains a major theme in South America, with HDI set to acquire Liberty Seguros in Chile, Colombia and Ecuador in 2024, building on its previous purchase of Liberty’s Brazilian operations. These moves have significantly strengthened HDI’s presence across the continent.

Specialty insurers, particularly in the property and casualty market, are attracting more attention, driven by the importance of technology and data integration in merger and acquisition strategies.

Despite the challenging conditions in dealmaking, some of the top performers have used this time to plan for future growth. As market conditions begin to improve, a clearer path for M&A activity is emerging, although the recovery is likely to vary by region.

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