Australia’s general insurance industry is poised for a major shake-up, with mergers and acquisitions (M&A) expected to pick up in the next few years, according to Deloitte.

Limited organic growth opportunities, increased rivalry between intermediaries and pressure to expand top-line revenues either domestically or in Asia will drive up M&A activity.

The huge deal last year between IAG and US giant Berkshire Hathaway, plus New Zealand-based CBL’s acquisition of Assetinsure, have set the wheels in motion, Deloitte says.

“It has been many years since any of the industry segments saw numerous sizeable transactions in a short period of time. However, we are beginning to see the impact on M&A of underlying drivers of changing customer behaviour, value-chain economics between distributors and manufacturers and regulatory change.

“These could all be converging to create a very active M&A environment in the next few years.”

Intermediary M&A activity will remain solid after a year in which five deals worth $700 million were inked, Deloitte says.

“We do not anticipate a slowdown in M&A activity [this year]. Given the pressure on commissions – correlated to general insurance premiums – and limited organic growth opportunities, intermediaries will continue to look for growth through M&A.

“However, the challenge for intermediaries is increasingly the ability to source acquisition targets of scale, because it is time-consuming to grow your top line by single-digit millions at a time with small bolt-on deals.

“We expect strong competition among the major players for any large-scale brokerage firms coming to market.”