New market research by FTI Consulting shows a slight slowdown in European insurance M&A deal volumes relative to Q1 2021, which it says were affected by macro trends such as the pandemic and the Russia-Ukraine conflict.
In part, analysts noted that the comparative slowdown likely reflects the backlog of transactions that completed in Q1 2021 that had been delayed during 2020 due to lockdowns and economic uncertainty.
As social restrictions were lifted and equity and credit markets recovered, M&A deal volumes were buoyant throughout 2021, with announcements being made right until the year end.
Furthermore, UK insurance assets were being put up for sale in advance of an anticipated increase in capital gains tax for March 2021, and although that increase did not materialise, the sharp rise in UK transaction volumes accounted for most of the peak European M&A activity in Q1 2021.
According to FTI Consulting, demand for insurance distribution businesses by international broker consolidators across the continent has underpinned the transaction volumes, with Howden, GRP, Sakra and MRH Trowe all strengthening their market position with several acquisitions in the region.
US-based buyers also continue to acquire in Europe to expand their footprint and take advantage of under-tapped niche insurance markets, supporting the thesis for this recent trend.
Another reason cited for the slight slowdown in deal volumes relative to early 2021 was the impact of the Russia-Ukraine crisis on general market volatility, risk appetite and availability of debt financing.
Furthermore, rising interest rates could present a headwind to the buyouts market with debt financing becoming more expensive.
The UK and Ireland continued to lead the European market for insurance industry M&A, followed by the DACH region, FTI research shows. Iberia, Italy and the Nordics experienced a spike in M&A activity this quarter, all fuelled by broker consolidation. Benelux, France and CEE insurance M&A volumes remained steady.
