How insurance M&A markets are becoming increasingly sophisticated

Hunt for high-quality assets

Insurance executives expect increasing competition for assets — with 80% pointing towards private equity (PE) and other funds. We are seeing PE activity across many areas of insurance, including participating in the extensive consolidation and reshaping of distribution businesses. PE investment will also be a key part of the development and monetization of new technologies supporting the sector. Read EY’s Global M&A themes 2018 for more insight on the M&A trends that we expect to see accelerate as more insurers seek to transform, using business acquisitions or disposals as elements of that transformation.

Shifting from optimizing to transforming

Transformational deal activity will continue through 2018 and beyond, and insurers will invest in InsurTech businesses as a way of accessing and operating in emerging “digital ecosystems.” New digital ecosystems are both a massive opportunity and an existential threat as such ecosystems will also be a route for sector convergence. We are seeing the creation of evermore sophisticated insurance M&A markets in response to ongoing sector transformation: bigger pipelines, better targeting and divesting assets at risk of disruption will be critical components of successful business portfolio transformation. Read EY’s Financial Services Global Corporate Divestment Study 2018 (pdf) to find out why strategic divestments play a key role in achieving this goal.

Market outlook

Looking ahead, while half (51%) of respondents are wary of changes in trade policy and protectionism, cross-border M&A will be a major theme in the next 12 months. We continue to see a clear outlook for insurance sector transformation and a record level of dry powder could also fuel increased activity in the broader Insurance sector by PE acquirers.