Global merger and acquisition activity increased by 9% in 2018, with 382 M & A & # 39; s in the sector, according to the latest insurance growth gap from law firm Clyde and Co.
This level of growth is despite the global economic and political uncertainty, including increasing concerns about Brexit throughout the year. Brexit is also the reason why the law firm expects that there will be a fiasco in mergers and acquisitions in the first half of 2019, because companies are waiting to see what will happen politically.
Andrew Holderness, head of Corporate Insurance Group at Clyde and Co., said most insurance companies and brokers have already prepared for Brexit.
"Most of our customers took steps two years ago, 18 months ago, and have taken steps to see if there is a deal, no deal, and ready to go," Holderness said in an interview with Insurance Business.
The reason why Brexit affects mergers and acquisitions is because of the larger economic factors, he said.
"It creates uncertainty and every CEO in an M & A world, it always puts a bit of a damper – not a total damper, but a bit of a damper – on every M & A activity," explained Holderness.
One thing that Holderness does not see is the size of mergers and acquisitions when it comes to brokerage.
"It has always been a theme that will have the primal moment just around the corner where there will be a lot of consolidation by intermediaries," Holderness said. "And it never occurred at that level, and what happened is that a constant stream of deals has been made."
The executive explained that although there had been some consolidation, he believes that many will never consolidate simply because of the culture in the smaller, medium-sized brokers.
"What we have now is three big brokers, we have Marsh, we have JLT and we have Willis, then we have the next layer of brokerage in terms of size, and they look at those big guys and think that this actually creates opportunities for them to to be smaller, "Holderness said.
"In short, they think they are more flexible, flexible, flexible and customer-focused – they have much more contact with their customer relationships, many of whom do not want to be the size of the big three, they see it as a unique sales function that they not be, and some of them are fiercely independent.
"They think:" I am where I am because I do not want to be in one of the big three – I enjoy the entrepreneurial spirit that they have. "And all brokerage companies on that side are very people-oriented, so you have personalities that you want to link together, it's not like a big insurance company."
Another highlight of the report from Clyde en Co was that technology and insurtech companies were and will remain a major driver of M & A activities. The report highlighted how companies worldwide invest in technology start-ups to innovate and think smarter.
Holderness explained that some companies are just concerned about start-ups that want to steal business, others welcome the innovation.
"Above the line, the insurance market has a choice, they will be worried about new players entering and disrupting our market and taking our share of the market, and some of the insurers have even played a pioneering role by opening up and say, "Well, we are here to incubate these startups and assist to develop their ideas with us." They said & # 39; let's embrace it & # 39; & # 39; he explained.
One way in which technology innovates is to improve internal processes for companies, enabling them to process claims faster and save money, Holderness says.
"The technology provides greater efficiencies internally within existing insurance companies," he said. "So that could help them to process claims faster – you now have an example of Lemonade, a relatively new start-up insurance company, where they say they've received the claim and now have it paid in seconds. technology that supports that process. "