September 29th, 2015

Disruptive Forces to Merger & Acquisition Activity: Globalization

Posted at 1:00 AM ET

Globalization in the insurance industry has historically been characterized by North American companies seeking to expand their business models to Europe, with Asia and South America as their secondary focus. European companies have sought to expand into North America, Asia and Latin America (for Spanish and Portuguese speaking companies).

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In recent years, the international focus of the mature North American and European carriers has been exacerbated by concern that the influx of alternative capital is permanent, making the current soft market the new status quo. One consequence of this is that specialty carriers are placing greater emphasis on the opportunities within long-term growth markets.

In addition to a continuation of the above trends, two material new themes have emerged:

  • (Re)insurance groups from mature Asian markets - and other emerging territories - have sought international growth in mature and emerging markets. Japanese businesses have been the pathfinders but there are signs that their interest may accelerate and spread to other Asian communities including China’s large insurers and investment groups (Fosun’s high level of activity is particularly notable).
  • Africa has emerged as an area of interest for specialty insurance carriers, given its economic development potential and the huge ongoing project investment. Acquirers of businesses to date have predominantly been the large South African financial groups and European (re)insurers, but there is a growing focus from other geographies including the developing markets of Asia.

The globalization of mergers & acquisition (M&A) players does not contradict the anti-correlation theory. However, the expanded universe of participants provides another set of acquirers competing for M&A opportunities who are willing to bid competitively for acquisition targets as a result of their strategic desires to achieve international expansion.

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