Insurance mergers and acquisitions (M&A) in Australia are likely to get a post-royal commission bump this year, with insurance brokerages likely to continue consolidating and the insurance subsidiaries of banks poised to become divestment candidates.

These are points made in a new global insurance report from Deloitte, which says regulatory reviews and Federal Government legislation will affect the operations of the Australian insurance sector.

Pointing to scrutiny of insurance broker remuneration and the sale of add-on insurance as factors that could affect the profitability of insurers as well as some specialist brokers and underwriting agencies, Deloitte says: “We expect regulatory factors to continue to drive M&A activity in Australia over the next few years.”

The business services company also forecasts continued consolidation within insurance broking in 2020, led by “key local players”.

“Transactions are likely to become very competitive, especially for any attractive mid-to-large-scale assets, with sellers having strong negotiating power at the table,” it says.

General insurers are likely to continue to review their portfolios and capital allocation and any underperforming or high-regulatory-risk assets are likely to continue to be disposed of, with capital reinvested in growth areas.

“Australia’s large general insurers increasingly have been focused on developing a value proposition that extends beyond pure insurance into the travel and home security customer experience,” Deloitte says.

Insurtechs will also attract partnerships as large insurance companies continue to use their venture capital arms to invest to improve the customer experience, it says, noting IAG, Suncorp, and QBE have been active in insurtech.