Mergers and acquisitions (M&A) in the global insurance industry dropped sharply in the first half, though law firm Clyde & Co expects the volume of transactions to start to rise again towards the end of the year, with the broker segment “leading the way”.

Clyde & Co’s Insurance Growth Report mid-year update shows there were 171 completed deals worldwide, down from 242 a year earlier, and 207 second half 2022.

In the Asia Pacific, completed M&A numbered 29, led by Japan’s 14 deals. Australia, China, Hong Kong and South Korea all had three. The total compares with 27 a year earlier and 33 in second half 2022. Asia Pacific M&A peaked at 52 deals in second half 2015. 

Compared with second-half 2022, insurance carrier M&A worldwide was down 17% in the six months to June 30, and down 9% in the Asia Pacific, 24% in the Americas, and 22% in Europe. 

Diminished appetite for insurtech and a changing regulatory landscape were key deal drivers.

The law firm says transactions are expected to bounce back in coming months.

“We anticipate that the volume of transactions will start to rise again towards the end of 2023 as insurance businesses acclimatise to the new operating environment, with the broker segment leading the way,” Clyde & Co Partner Eva-Maria Barbosa said. 

“The lull in insurer M&A will be short-lived. With insurers typically balance sheet-heavy at present, the break in carrier M&A activity is likely to be over. Meanwhile, private equity capital is returning to the market for broker deals.”

While deal volume is not expected to return to the highs of 2022 in the immediate future, M&A activity is expected to rebound in the second half, she says, as growth in M&A activity typically lags behind improvements in underlying market conditions by 8-12 months.

"The dip in completed transactions over the last six months is unsurprising,” she said. “Those with growth ambitions are also looking further afield.”

The US was still the most active country worldwide in the first half with 60 completed transactions, though that was down from 83 in the previous six months, followed by Canada and Japan. Europe had 47 deals – the fewest in more than a decade – led by the UK, with 11.