The global insurance industry has experienced a significant decline in mergers and acquisitions (M&A) during the first half of 2023, according to Clyde & Co’s Insurance Growth Report mid-year update.
Completed deals totaled 171 worldwide, marking a substantial decrease from 207 in the second half of 2022 and 242 during the same period the previous year.
The Americas witnessed the most pronounced drop in M&A activity, recording 79 deals, down from 104 in the latter half of 2022.
This decline brought M&A levels in the region to their lowest point since 2014. Despite this, the United States remained the most active country globally, with 60 completed transactions in the first half of 2023, down from 83 in the preceding six months.
In Europe, M&A activity reached its lowest level in over a decade, with 47 completed deals. The United Kingdom led European countries with 11 deals, although it slipped to fourth place worldwide behind Canada and Japan.
Asia Pacific experienced a decrease from 33 to 29 completed M&A deals, with Japan leading the region with 14 transactions, followed by Australia, China, Hong Kong, and South Korea with three each.
The Middle East and Africa were the sole regions to witness an increase in M&A, totaling nine completed deals compared to eight in the previous six months.
The decline in M&A activity has been influenced by several factors, including reduced appetite for insurtech businesses in certain regions.
In Europe, challenges in obtaining capital for insurtech firms are attributed to ongoing inflation and rising interest rates. The US, on the other hand, faced a shortage of true insurtech startups entering the market.
Regulatory dynamics have played a mixed role, with increased enforcement activities leading to higher costs of doing business in some areas, while new legislation in other territories creates business opportunities.
The rise of cyber threats has also impacted M&A considerations, with due diligence around cyber risks becoming a more prominent concern for deal-makers.
Despite the current lull, industry experts anticipate a rebound in M&A activity in the second half of 2023, as insurance businesses adapt to the evolving operating environment.
Growth ambitions are likely to drive renewed interest, particularly in the US and the Middle East, as well as the continued exploration of opportunities within the insurtech sector.