Insurance Industry

M&A Activity Moving Offshore

The historic domination by the U.S. for M&A activity in the insurance industry has slipped.
By: | September 30, 2014 • 5 min read

As with many other aspects of economic activity, mergers and acquisitions are moving offshore.


The historic domination of the United States in terms of the overall share of M&A activity in the insurance industry has slipped, as Europe moved into the front-runner position in the volume of transactions completed, according to the latest report from international law firm Clyde & Co.

The United States’ dominion in M&As is “an entirely natural consequence given the size and maturity of the world’s largest re/insurance market,” the report noted.

However, in the last 12 months, there has been a reversal. From July 2013 to June 2014, there were 139 transactions in Europe, up from 123, while in the U.S., there was a drop from 113 to 97.

Mergers_DougMaagDoug Maag, a New York-based partner of the firm, said: “Contributing factors to this downward trend in the U.S. appear to include differing buyer/seller perceptions of company value, ongoing regulatory uncertainty, the uncertain economic outlook, and some company’s preference to reinvest excess capital into the business or to satisfy shareholders with stock buybacks and dividends”

The reversal may not be a long-term trend, Maag said.

“It remains to be seen whether Europe will retain that lead, of course, particularly given regional challenges posed by unrest in Ukraine and sanctions against Russia,” he said.

Regulatory Concerns

The U.S. has its own set of challenges, Maag said.

“Questions continue about the durability of the global economic recovery,” he said. “Private-sector uncertainty is a natural byproduct of the political logjam in Washington, which has now persisted for a very long time.”

Also, some insurers have to worry about the prospect of being designated as a Systematically Important Financial Institution (SIFI), he said.

“Large insurance companies that do not qualify for SIFI designation now may, by virtue of an acquisition, change their profile in a way that causes them to become so designated,” Maag said. “If that happens, the insurer becomes subject to heightened levels of supervision and regulation, and possibly to enhanced capital requirements.”

But on the positive side, it could all change, and quickly, Maag said.

“With a single quarter of particularly bright economic indicators or a meaningful breakthrough in the political logjam, risk appetite could return with a vengeance,” he said. “I do think this will happen but the question is when.”

“GDP growth is particularly critical in stimulating or dampening M&A,” Maag said. “The consistent rise in the U.S. stock markets over the last 12 months may lead firms to conclude that valuations are back at levels at which they would consider sale, and, therefore, increase the number of management teams willing to consider an offer,” he said.

The faster than expected growth in U.S. GDP in the second quarter of 2014 may also signal a return to a macro-economic environment that could stimulate expansion through M&A, he said.

Looking for Returns

Probably the most powerful trigger for M&A activity in the coming year is the excess capital overhanging the sector, said Andrew Holderness, global head of corporate insurance for London-based Clyde & Co.

“In the absence of a catastrophic event causing significant balance sheet damage, and with rates having trended downward steadily over the last couple of years, re/insurers have become even more active in their search for alternative strategies.” — Andrew Holderness, global head of corporate insurance, Clyde & Co.

“Shareholders are looking for decent returns on their investments and, if management cannot deliver this operationally then there will be pressure either to return it or deploy it elsewhere,” said Holderness.


“The key challenge is for those companies that cannot demonstrate underwriting excellence or are unable to scale up and move into different markets to acquire new business,” he said.

“In the absence of a catastrophic event causing significant balance sheet damage, and with rates having trended downward steadily over the last couple of years, re/insurers have become even more active in their search for alternative strategies.”

In addition, Holderness said, size appears to be becoming increasingly important — with balance sheet strength seen as being critical to clients, he said.

“If this is the case, then strategic mergers and acquisitions will be driven by the desire to reach optimal scale and relevance,” he said.

Regional Highlights

Here are highlights of region-by-region reports, based on data supplied by Thomson Reuters financial services.

­­­• Asia Pacific

In the last few years, in contrast to other regions around the world, the volume of M&A activity in the insurance industry sector in Asia Pacific has remained comparatively steady.

This pattern continued from July 2013 to June 2014, with an uptick in deals in the second six months. Overall, across the 12-month period, the number of transactions reached 60, compared to 66 in the previous year and the region accounted for 18 percent of deals on a global basis.

“Government liberalization moves will drive M&A activity in India,” said Vineet Anjela in Clyde & Co.’s New Delhi office.

“Interest in M&A in Indonesia is set to rise,” said Ian Stewart of the firm’s Singapore office. “This is a stand-out market in a region that offers promising growth.”

Dean Carrigan of the firm’s Sydney office noted: “We expect some consolidation in Australia to take place between small independent broking groups.”

• Middle East and Africa

The Middle East and Africa span a range of markets at different stages of development both economically and in terms of the insurance industry.

Overall, the number of insurance industry M&A transactions has risen to 17 in the period from June 2013 to July 2013, compared to 7 in the prior year.

However, while activity in the Gulf Cooperative Council (GCC) has been limited, emerging economies such as Turkey and Morocco have seen a number of deals, and a significant spike in transactions elsewhere in Africa suggests that the insurance industry could be waking up to the continent’s huge potential.


“We are seeing a surge of interest from overseas in starting up reinsurance operations in the Dubai International Financial Centre,” said Dubai-based Wayne Jones of Clyde & Co.

• Latin America

The last year has seen a range of economic and political factors impacting a number of countries in Latin America, many of which could have acted as a brake on M&A activity.

Despite this, the region has seen a spate of deals from July 2013 to June 2014. There were 16 transactions in the period across the region, compared to 20 in the previous 12 months.

“We are seeing Latin America playing with the scale, expertise and ambition to look beyond their national borders for opportunities,” said Sao Paulo-based Stirling Leech of Clyde & Co. “A number of U.S.-based insurers, in particular, are looking to establish or strengthen a presence in the region.”

• Bermuda

While the overall volume of deal activity has not increased sharply this year, it is likely the market is reaching a tipping point at which more M&A activity will occur, Clyde & Co. said.

Steve Yahn was a freelance writer based in New York. He had more than 40 years of financial reporting and editing experience. Comments can be directed to [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]