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M&A to accelerate as insurers respond to evolving client demand: Deloitte

23rd July 2019 - Author: Luke Gallin

Analysis by Deloitte claims that the majority of insurers expect that merger and acquisition (M&A) activity will drive more than half of the insurance industry’s growth over the next five years.

MergerResponses from Deloitte’s survey of 200 insurance leaders across the EMEA region shows that 72% of survey respondents expect the majority of industry growth to come from M&A activity.

Driving some of this sector consolidation and what is viewed as the biggest challenge for insurers over the next three years, is expanding customer expectations and demand.

Deloitte explains that this is leading insurance companies to expect a need to broaden their services to include things like cyber response support, security, and to add further value through other products that are more than just the insurance protection.

Head of Insurance for Deloitte North and South Europe, David Rush, said: “Customers’ expectations have evolved. Experience in other industries has taught them to expect more and they have become used to being able to access relevant services in one place. Despite the fact that insurers are bullish about the industry’s progress in adapting to the new digital age – 80% think the industry is keeping up with technological advancement – there has been little genuine disruption in the market so far.”

In light of changing client demand, survey responses reveal that the majority of insurers feel that new, non-traditional products are vital to attracting new customers.

A significant 93% of respondents said that they will make M&A part of their growth strategy both next year and over the long-term. 81% said that they are planning partnerships in existing markets, while 44% have plans to establish new relationships in order to enter new markets.

Regarding Brexit, and 78% of respondents said that Brexit is currently lowering their M&A appetite, although over the longer-term insurers are more confident in M&A, with 52% expecting to complete two or more deals over the next three years.

Global insurance sector financial advisory leader at Deloitte, Ian Sparshott, said: “Against a backdrop of surplus capital and continuing low GDP growth and interest rates, M&A remains a critical growth strategy for many insurers. The survey results suggest M&A activity will centre around core markets and products but also be used, either via acquisition or partnership, to access technologies that enable improvements within the industry.

“This could include distribution, new products, underwriting capabilities or claims process improvements. However the successful integration of newly acquired assets will be crucial in determining the success of this strategy.”

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