Merger and acquisition (M&A) opportunities in life insurance remain limited after many years of strong activity, with the sector now largely foreign-owned and the top three insurers controlling more than half of net policy revenue, Deloitte says.

“With the exception of Challenger, which is a local annuities specialist, and Westpac’s life insurance operations, most other locally owned businesses, such as Clearview, St Andrew’s, NobleOak Life and Hallmark Life, are significantly smaller,” a new Deloitte insurance M&A report says.

The firms are likely to be increasingly under regulatory pressure given intervention by the Australian Prudential Regulation Authority to ensure the sustainability of individual disability income insurance via stronger capital requirements for relevant players.

Deals in recent years have included National Australia Bank’s sale of an 80% stake in MLC Insurance to Nippon Life, Commonwealth Bank’s sale of CommInsure Life to AIA and ANZ’s sale of OnePath Life to Zurich.

Suncorp has sold its life business to TAL and AMP is set to complete the divestment of its life division to Resolution Life by June 30.

Deloitte says more subdued deal volumes last year reflected the previous activity, while potential players across life and general insurance have also been monitoring impacts from the Hayne royal commission.

In the US, life and health deal-making last year was mainly seller-driven, with several companies looking to shed non-core assets, “skinny down” their balance sheets and focus on other lines of business, the report says.