Insurance mergers and acquisitions slowed in the first six months of the year, according to an update from Clyde & Co.

The number of transactions completed fell 40% compared with a year earlier to 103, a 15-year low for first-half M&A activity, the law firm’s Insurance Growth mid-year report says.

Clyde & Co says high interest rates are among the reasons for the slump in transactions.

“A combination of factors has reduced deal activity globally to a crawl over the first half of the year,” the report says. 

“High interest rates, stubborn inflation, high borrowing costs and geopolitical uncertainty [have] seen 2024 continue very much in the same vein as 2023.

“From a global perspective, caution abounds. Potential acquirers are more selective, keen to avoid buyer’s remorse by ensuring cultural and strategic fit, while sellers are holding out for better prices in more favourable circumstances.”

Brookfield Reinsurance’s acquisition of American Equity Investment Life for about $US3.59 billion ($5.38 billion) was the largest deal completed, the report says.

In the Asia-Pacific region, the number of deals fell to 23 from 29 a year earlier.

“The [region’s] M&A market has been comparatively resilient in 2024,” the report says. “While deal activity is down year on year, this decline has been less pronounced than in the US or Europe.

“Contrary to global trends showing dampened M&A activity in the [property and casualty] market, the ... region has proved to be resilient, with solid M&A activity.”

Clyde & Co predicts an uptick in the medium-term, saying the “pieces of the puzzle needed to bring the market back to life may be falling into place”.

Interest rates are easing, which should mean there is less benefit in companies maintaining large cash holdings on their balance sheets.

“If this trend continues, the potential returns from strategic acquisitions versus capital retention will become increasingly attractive with each central bank missive. While acquirers are likely to become more bullish, on the other side of the table, sellers may be running out of road.”