The Mergers & Acquisitions (M&A) market has been booming in the insurance sector in recent years, many are wondering whether this will continue in a year when a recession is on the horizon.
We have seen global powerhouses such as Arthur J Gallagher make a number of sizeable acquisitions; Markerstudy, who we are proud partners with, have strategically strengthened their position in the UK Personal Lines market; and a number of other groups in the protection sector, including Phoenix, have made numerous purchases.
Although noises from a number of the major players would suggest that there will be no let up if the right opportunities are there, it remains to be seen what the position will be for those at the other end of the deal, especially in the smaller broker market.
I read an interesting article by specialist insurer CFC Underwriting recently. They launched a survey in the summer of 2022 on this topic and with over 650 broker responses there were some very interesting data points that they shared.
Of the brokers who took the survey 38% had clients who were actively looking to sell their business in the next 1-2 years.
The primary sectors where brokers were saying this was Tech, Retail, and Manufacturing (two-thirds of the response across just these 3 sectors).
With nearly two-thirds of these businesses being sub £15m revenue, that highlights the types of business where the M&A activity may be in 2023 insurance market.
Naturally, as CFC mentioned in their article, the playing field has seen a lot of activity since last summer, so how many of the brokers in the survey statistics are still in the potentially open position, we don’t know. But with this only being those surveyed, and 38% of 650 still being a potential 247 transactions, there is very likely still many out there in the same position.
Will it be that the buyers and their PE backers will focus on the smaller SME businesses, over more sizeable transactions given the ongoing fear of a recession, Willis Towers Watson believes this a likely scenario.
With huge investments in recent years the tech and digital market, including several Insurtechs could also be affected, especially if funding is pulled from anyone not quite where they wanted to be coming out of 2022. Of course, there are opportunities there for the larger software houses and Insurtechs to invest.
Whatever happens, 2023 will undoubtedly be an interesting one in the insurance M&A market.
Source of CFC article - An M&A round-up for 2022 | CFC (cfcunderwriting.com)
CFC also provide an award-winning transaction liability private enterprise policy, which can be explored further by speaking to experienced TLPE underwriter Jasmine Afreh - Jasmine Afreh Cert CII | LinkedIn
