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Strong appetite for M&A

Global Capital Confidence Barometer | Insurance | 16th edition

Our 16th Global Capital Confidence Barometer indicates renewed optimism about the M&A market among insurance executives.

Improving deal confidence

Deal confidence continues to improve, with 61% of insurance executives surveyed expecting to actively pursue acquisitions — the highest level since October 2015. Although 2016 M&A did not top 2015’s record levels in the sector, a strong finish to the year and a flurry of dealmaking in early 2017 are fueling executives’ positive M&A intentions.

Improving economic conditions underpin deal activity. European M&A markets, in particular, have seen a strong start to 2017.

Downside risks

While 94% of respondents see the global M&A market as either stable or improving over the next 12 months, significant downside risks still remain. Uncertainty about US Government policy and high volatility in capital markets are named as key risks to the industry, with 71% citing a broad range of geopolitical or emerging policy concerns as the greatest risks to their business.

The search for innovation

Reacting to competition and new product or service innovation remain top of the agenda for insurers across geographies as companies use M&A to add innovative capabilities, improve customer engagement and stay relevant in a rapidly changing market.

The impact of new technologies on the value proposition for ongoing and legacy insurance businesses is yet to be fully assessed, and such operational advances will create the basis for M&A transactions, potentially leading to consolidation and new ways of addressing the growing challenge of large legacy insurance businesses and portfolios.

In particular, insurance companies are likely to pursue dealmaking in the InsurTech ecosystem as emerging technologies continue to disrupt the insurance value chain.

Outlook

Read EY‘s Global insurance M&A themes 2017 for more insights on dealmaking in the insurance sector in 2017 and beyond.