Global Instability Leads to 16-Year Low for Insurance Carrier M&A Deals

Two new reports highlight the stagnant mergers and acquisitions in the insurance industry in 2024.

In fact, global insurance carrier M&As slumped to a 16-year low in 2024 amid a wave uncertainty and volatility through the year, Clyde & Co.’s annual insurance Growth Report reveals.

Softening markets, an increasingly hostile claims environment, growing fears over catastrophe risk and conflicting regulatory regimes, were the primary reasons for the slowdown last year, the Clyde & Co. report stated. In addition, private equity was less active, and many deals took longer to finalize, adding to uncertainty.

There were just 204 transactions completed in 2024, down from 346 the previous year and the lowest figure since the Clyde report was first published in 2009.

Interestingly, despite last year’s slump in deals, the aggregate value increased due to a few transformative deals, according to Deloitte’s 2025 Insurance M&A Outlook.

Deloitte’s report examines how shifting economic conditions, tax reform uncertainties, and evolving risk factors are shaping dealmaking strategies.

The U.S. market saw the most M&A activity during 2024 with 69 deals completed, due to increased activity in the life sector.

UK and Europe saw the largest slump in M&A activity with a 48% drop.

High interest rates, geopolitical instability and increasing regulatory oversight of the sector, reduced carrier deals, the Clyde report added. The global MGA sector benefited, according to the report, as carriers in the U.S., Europe and the Middle East increasingly deployed capital in the space.

An M&A rebound is expected in 2025. The Clyde report said this will be led by strong activity in the U.S. and driven by investor confidence, the new government’s “appetite for deregulation and a lower cost of capital.” International market M&A is expected to remain selective.

Nine out of 10 insurance companies surveyed by Deloitte (in September and October 2024) anticipate an uptick in M&A activity this year, fueled by pent-up demand and strategic restructuring.

As climate-related risks reshape underwriting and capital allocation, 69% of financial services firms (including insurers) view environmental, social, and governance factors as a top M&A consideration, the Deloitte report added, citing an earlier survey (January 2024).

Insurtech companies are prime acquisition targets because of their automated underwriting, fraud prevention and predictive analytics, Deloitte said.

Foreign sovereign wealth fund interest in the market also grew, a trend that is predicted to accelerate in 2025 as investors seek out the reliability of returns from insurers, according to the Clyde report.

Foreign interest in the U.S. excess and surplus lines market is expected to grow, while U.S. carriers may seek underpriced assets in Europe and beyond.

A divergent global regulatory landscape will likely be a catalyst and inhibitor for M&A in 2025, while the number of MGAs will continue to rise.

Regional consolidation, particularly in markets such as the Middle East, is expected to continue, while a softening global rate environment will drive specialty plays, the Clyde and Co report stated.

“With many of the challenges that characterized 2024 persisting, dealmaking will be tough in 2025 as businesses grapple with a plethora of evolving risks. This is fueling the growth of MGAs globally as they offer an appealing avenue to establishing footholds in uncertain markets and industries,” said Eva-Maria Barbosa, partner, Clyde & Co. “While we can expect this trend to continue, traditional dealmaking could be rekindled too, particularly in the US where a deregulated economy is likely to prompt new activity around the world. The pipeline of deals already mooted in the first half of 2025 is very strong.”

The pending expiration of TCJA (Tax Cuts and Jobs Act) provisions, global tax policy changes and new corporate tax structures (such as the global minimum tax) could significantly influence deal timing and structuring, Deloitte added.

Topics
Mergers & Acquisitions