M&A activity in insurance sector set to soar in 2021

MENA saw 12% more completed deals in 2020 as regional players sought to expand their footprint or grow business

Investors speak in the lobby of the Dubai Financial Market after Joe Biden won the U.S. presidency, in Dubai, United Arab Emirates November 8, 2020.

Investors speak in the lobby of the Dubai Financial Market after Joe Biden won the U.S. presidency, in Dubai, United Arab Emirates November 8, 2020.

REUTERS/Christopher Pike

Mergers and acquisitions (M&A) activity will surge in the insurance sector in first half of 2021, given the volume of deals announced in recent months, said Clyde & Co in a new report on Thursday.

In a report titled Finding Opportunity in Adversity Insurance, the international law firm said the number of completed deals worldwide is likely to surpass 220 within a six-month period for the first time since 2019, and it could go even higher in the second half of the year.

There were 407 completed M&As worldwide in the insurance sector in 2020, down from 419 the previous year. An anticipated pandemic-induced dip in activity in the second half of the year failed to materialise, however, with 206 deals in H2 2020, slightly up from 201 in the first six months.

The Middle East and Africa saw the biggest gains in percentage terms, albeit from a low base, with 32 completed deals in 2020, up from 12 the previous year.

Clyde and Co.'s Dubai-based corporate insurance partner, Peter Hodgins, said: "The prospect of increased M&A activity in the Middle East has long been predicted by legal commentators. Low penetration rates and highly competitive markets have seen as being ripe for consolidation. However, historically there have been significant road blocks in key markets such as the UAE and KSA due to a combination of unrealistic pricing expectations, a reluctance to sell to competitors and significant regulatory hurdles in acquiring substantive holdings in listed entities.”

Growth in insurtech

He said last year appeared to have been a watershed in the industry due to a combination of regional players seeking to expand their footprint or grow the scale of their operations and some international players consolidating operations into key markets. “We are witnessing a growth in insurtech allowing operational efficiencies for those players willing to invest. There have also been significant moves by regulators to encourage consolidation, with increased capital requirements for insurers and intermediaries becoming a feature of many regional markets."

Between 2009 and 2020, the most active countries in the MENA region by the number of deals were Egypt with 11 deals, Turkey (6) and UAE (3)

Ivor Edwards, Head of Clyde & Co's European Corporate Insurance Group, said: “Deal-makers’ appetites have returned, buoyed by growing confidence in the economic outlook and the sense that there are opportunities to be had. Despite market hardening, many of the fundamentals driving M&A will persist. These include competition for assets, the need to diversify portfolios, add digital capabilities, and increase scale and market share. The availability of plentiful capital, combined with a deeper pool of targets, will give buyers plenty of choice although we expect them to select acquisitions carefully to ensure the best fit with their strategic objectives.”

(Writing by Brinda Darasha; editing by Seban Scaria)


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