Strategic buyers and foreign government wealth funds may revive merger and acquisition activity in the US insurance market late this year, according to a new report by Deloitte.

The international accounting and consulting firm says the sharp drop-off in mergers and acquisitions since January last year could end as insurers and financial institutions unload non-core assets to raise capital.

Deloitte says buying momentum is increasingly shifting from private equity firms to strategic buyers whose core business is insurance.
 
“Typically, such buyers often seek to achieve synergies in growth, distribution and expenses,” it said.

“They may want to enter new markets and lines of business in order to expand their customer and revenue bases and geographical reach.”

Deloitte says given the prevailing tight credit market conditions, Chinese and Japanese companies with strong foreign currency positions, and those Bermuda and European insurers that avoided major investment losses, may be the strongest candidates to make acquisitions.

Sovereign wealth funds may also seek to invest in insurance companies as Middle Eastern and Asian governments strive to increase the sophistication of their financial sectors by gaining access to resources and skills.