The number of insurance industry mergers and acquisitions (M&A) in the Asia Pacific region jumped 22% in the first half of 2020, with six completed in Australia, though coming months will be “stark,” law firm Clyde & Co says.

The deals to June 30 would have been negotiated and agreed “pre-pandemic” in 2019, Partner Ivor Edwards said.

“The impact of COVID-19 on insurance M&A will only become clear in the coming months and we expect it to be stark in the short term,” Mr Edwards said.

“The past few months have been plagued by a level of uncertainty – the enemy of deal-making – rarely seen before.”

Australia’s deal volume of six was second only to Japan’s 14 in the Asia Pacific region, where mergers and acquisitions came to 38 in the six months to June 30, up from 31 in the last half of 2019 and matching the same period a year earlier, Clyde & Co’s Insurance Growth Report mid-year update says.

Globally, 201 deals were completed worldwide, up from 197 in the second half of 2019, only the second six-month period in the last five years where the volume of transactions exceeded 200.

Only six deals were valued at over $US1 billion ($1.39 billion), compared to 20 last year.

While the outlook for the second half of the year is for a drop in M&A activity, Clyde & Co says the stage is set for transactions to to “make a comeback” next year.

New York-based Clyde & Co Partner Vikram Sidhu says distressed businesses will be seen, along with insurers pulling out of certain lines, industries or geographies.

“Those looking to rationalise their operations will move to divest divisions and books of businesses that do not fit with their core strategy or their financial goals,” he said.

The time taken to reach an M&A deal is likely to be longer than normal for the foreseeable future as investors become more selective, a trend the pandemic will strengthen, the report says.