Willis Re’s latest 1st View renewals report suggests that 2018 could be the most active year for M&A across the global insurance sector since 2015 – when volume was $121 billion, boosted by the ACE-Chubb merger – with YTD deal volume running at $44 billion.
Transactions such as AXA’s $15 billion purchase of XL, AIG’s purchase of $6 billion-rated Validus and the $4 billion spent by Phoenix to acquire Standard Life Aberdeen’s life business has left 2018 looking likely to eclipse the $61 billion worth of M&A deals clocked across 2017.
The pipeline is to remain active, according to Willis Re, with press reports indicating that sales processes are currently in progress on Aspen, several Lloyd’s platforms and a prominent closed life insurance book in Germany.
A continued interest from incumbents in adding to distribution and the product suite, improving focus on core activities and making more efficient use of capital are considered factors driving consolidation.
A changing Bermuda landscape and a view that “bigger is better” has also been highlighted.
Some carriers may reconsider their MGA strategy however, as emphasis among reinsurers shifts from top-line growth to pure underwriting profitability, endangering some coverholder relationships.
The report references a “new pricing normal” as something that could impact M&A, as acquirers exercise greater caution and sellers adjust their pricing expectations.