Deals Activity: Moderate
Restructuring Activity: Moderate
Deals activity in Insurance
1. Downward pressure on profitability has encouraged a steady flow of deals to help reduce overheads and strengthen market position.
2. The failed LV= deal demonstrates the challenges of completing transactions in a sector with significant public and regulatory scrutiny.
3. New legislation limiting the ability of insurers to promote themselves to new customers could spur further changes in the market.
Restructuring activity in Insurance
The last two quarters have seen a slight shift in restructuring activity due to a focus on a stronger digital ecosystem and an emphasis in prioritising risk predictions given some of the macroeconomic indicators over the last few years.
Given the investment in technology and greater risk controls, the industry will remain resilient over the near term at least whilst firms assess their options across the market.
Premium volume and price hikes have seen robust growth on some revenue lines (e.g., nonlife insurers) although ongoing geopolitical and macroeconomic headwinds continue to add pressure to the industry’s bottom line.
Robust premium rate increases across many lines of business have led to strong reported profits and improved solvency ratios.
However, the insurance sector, particularly in the B2C space, is under growing pressure as a result of increased regulation and intense competition. New legislation has limited the ability of consumer-facing insurers to offer discounts to new customers or to price certain risk factors effectively (especially in car insurance).
Insurers also face a number of underwriting issues. Increasing demand for pricing transparency from the PRA and FCA continues to place additional burdens on insurers. The impact of these changes is yet to be fully determined. At the same time, risk profiles will likely need to be re-evaluated considering the longer-term impacts of climate change, heightened risk of pandemics and associated changes in societal behaviour.
As with many sectors, investment in innovative products and services is taking place across the insurance industry. New data analytics technology is already helping provide innovative solutions for customers, such as 'black box' recording devices in cars to monitor driver performance.
At the same time, the requirement for insurers to demonstrate and document operational resilience further burdens companies, especially when combined with pressures to reduce back-office costs. The result may be further consolidation and disposal of non-core insurance arms by larger financial services groups.
Ultra-low interest rates and dividend blocks have, in recent years, dampened investment returns. This in turn has led to some insurers pursuing riskier investment strategies and increasing exposure to more diverse asset classes.
Brokers are identifying problems arising from a push for immediate information alongside reduced customer loyalty – a strong theme coming out of the market.
Supporting insurance groups with the restructuring they need to undertake so that they can continue to service their pan-European clients after the UK left the EU.
Supporting the run-off market
Providing insurers with sell-side support on run-off deals including in-depth financial analysis, production of sales documentation and assisting on bidder negotiations. Supporting dedicated run-off acquirers with buy-side due diligence and the design and implementation of strategies to aid their growth and underpin improvement in their core processes.
If you have a challenge or opportunity, our Insurance Restructuring team are here to help you navigate what's next.Find out more
Find Your Expert
Ed Boyle and Nick Smith are joint Sector Leaders at Interpath for FS overall, supported by an experienced senior team. This team tracks four key sub-sectors including the Insurance segment. Darryl Ashbourne
leads our approach to the Insurance sector nationally.