Global insurance sector mergers and acquisitions increased by 9 percent in 2018, with the Americas showing the most active deal activity, according to a new Clyde & Co. report.

There were 382 completed mergers and acquisitions worldwide for the insurance sector in 2018 versus 350 the previous year, said The Clyde & Co. report, “Navigating a Course Between Uncertainty and Opportunity.” What’s more, the report tracked three consecutive six-month periods of M&A growth for insurance as of the end of 2018.

Clyde & Co. said the Americas remained the most active region for insurance sector M&A with 189 deals in 2018, but there was a slight dropoff in deal activity in the Americas in the second half of the year. There were 92 transactions for H2 2018, down from 97 in the first six months. Asia Pacific saw the biggest gains year-on-year with 59 deals, up from 42 in 2017, with M&A accelerating through the year. Europe was steady with 122 completed deals in 2018, up from 118 in the previous year.

“Transaction activity worldwide was buoyant in 2018. Against a backdrop of stiff competition on pricing, stock market volatility and persistently low interest rates, a merger or acquisition remains a key strategy to reach new customers and markets and to drive down costs by delivering synergies,” Andrew Holderness, global head of Clyde & Co.’s Corporate Insurance Group, said in prepared remarks.

Holderness cautioned, however, that factors including Brexit, trade wars and protectionism could hamper deal-making as 2019 gets underway. He said the slowdown in the second half of 2019 for the Americas is a potential sign of things to come, at least in the short term.

“The slowdown in the Americas in the second half of last year is indicative of heightened investor caution, and we predict 2019 will be a year of two halves: a slowdown in M&A in some markets in the first six months, while the second half should see a return to form,” Holderness said.

The report found that there were 18 mega-deals valued in excess of $1 billion in 2018, including the year’s largest, AXA’s $15.1 billion acquisition of XL Catlin. In 2019, further consolidation is expected with a number of large businesses across the world actively on the acquisition trail.

Tech, Regulation, Uncertainty

Technology remained a key driver of M&A in 2018, according to the report, particularly with an increase of insurers investing in InsurTech startups. These included France’s CNP Assurances investing in mobile payment solutions company Lydia; Berkshire Hathaway buying a stake in One97 Communications, India’s largest digital payments company; and HSB, part of Munich Re, acquiring U.S.-based relayr Inc., a global industrial Internet of Things technology company.

Another factor in mergers and acquisition: regulation. Clyde & Co. said that regulators in a number of countries have been introducing legislative changes that are having an impact on M&A. Tighter capital requirements in markets across Southeast Asia, the Middle East and South Africa will lead to consolidation or players being forced out of the market, the report predicted.

Clyde & Co. said it sees the pace in M&A transactions slowing through the first half of 2019, but there will be a pickup in the second half of the year as uncertainty diminishes about Brexit in Europe, trade tensions between the U.S. and China, and other global circumstances.

Source: Clyde & Co.