Uptick in M&A activity among large carriers expected

The law firm’s Insurance Growth Report 2024 stated M&A activity in the UK market remained stubbornly low during the first half of the year, mirroring corporate activity in the wider market that could be set to change as we head towards Christmas.

While 200 of the more than 230 deals struck in 2023 were focused on brokers and intermediaries, Clyde & Co predicted the tale of the end of 2024 could be dominated by M&A among the “larger end of the capitalisation spectrum”.

Clyde & Co’s forecast follows press reports that bids are in the pipeline for Esure, Hiscox and Beazley. 

Andrew Lucas, partner in the London office of Clyde & Co, said several UK carriers have been touted as would-be takeover targets for foreign suitors, attracted by the combination of strong fundamental performance and low valuations.

Should the second half of this year see an acceleration of M&A activity, Lucas stated it’s likely that bolt-ons and niche acquisitions though will assume the bulk of the deals being struck in the UK.

MGAs will remain attractive targets for insurers and financial investors more broadly, he added.

Lucas said: “The desire to bring operations in-house, while taking advantage of specialised underwriting expertise, market knowledge, proprietary data and technology infrastructure will fuel interest – though the relative scarcity of investment opportunities may stymie some efforts, or start bidding wars.”

Global outlook

Turning to the global outlook for M&A deals, Clyde & Co’s report suggests that after the slowest half year since the law firm's report began in 2021, the pieces of the puzzle needed to bring the market back to life may finally be falling into place.

Eva-Maria Barbosa, partner of Clyde & Co, said while the total number may not increase dramatically, we are increasingly likely to see deals that span a number of jurisdictions, with some of the major carriers now looking to take on books or businesses that span eight to 10 countries in one swoop.

Fellow partner Peter Hodgins added the US election will bring us near the end of a period of exceptional political change, and with interest rates broadly tracking downwards, acquirers are likely to become more bullish.

He said: “Sellers may be running out of road. Businesses that have relied on financing will look to divest non-core businesses or underperforming operations.”