India's M&A insurance market sees competitive shift

Value of deals surged by 60% to $20b in Q1 2024.

Despite a decline in outbound merger and acquisition (M&A) activity to $570.3m in the first quarter of 2024 (Q1 2024), Indian corporations are poised to pursue international deals amidst global inflationary pressures. 

The value of M&A deals surged by 60% to $19.6b in Q1 2024, highlighting robust domestic deal-making capabilities despite some moderation in private equity transactions, Gallagher's “Expanding the M&A Horizon in India” unveiled.

“India is an underpenetrated market, and there is a huge potential for M&A insurance in the country. There is still work to be done, but the message is being heard, and the onus is on the broking community to continue to communicate the value of M&A insurance to clients,” Ashwin Sunder managing partner of Gallagher in India said in the report.

“The earlier M&A stakeholders engage with us, in the same way as is now commonplace in US and European deals, the more we can do to protect and expedite their transactions.” Sunder added.

The financial services sector, contributing significantly to India's economy at 10.6%, saw notable M&A activity with transactions like the merger of IDFC First and IDFC Bank, reflecting ongoing consolidation and regulatory dynamics shaping the industry.

Innovative insurance products are reshaping India's insurance landscape, with M&A insurance evolving to support cross-sector M&A trends. 

The market has seen increased participation from insurers and managing general agents (MGAs), intensifying competition and driving down insurance rates from previously higher levels to between 1% and 2.5% depending on the transaction type.

India's economic trajectory points towards becoming the world's third-largest economy by 2027, buoyed by investor-friendly reforms, robust domestic savings, and heightened foreign investments. 

The outlook for 2024 remains optimistic, driven by structural reforms, favourable valuations in private equity, advancements in AI, sector consolidations, and robust adoption of environmental, social, and governance (ESG) strategies.

Key sectors like healthcare, renewable energy, infrastructure, manufacturing, and financial services are witnessing heightened merger and acquisition (M&A) activity. 

M&A insurance has emerged as a critical risk management tool for both domestic and international firms, with growing awareness of its benefits. Increased competition in the M&A insurance market is expected to lead to lower rates and broader coverage options over the next year.

Looking ahead, India's evolving insurance market and dynamic M&A landscape are set to continue attracting attention and investment, supported by competitive insurance solutions and strategic M&A initiatives across key sectors.