Asia-Pacific M&A decline less severe amidst global drop

Comparative resilience seen despite significant global downturns.

Amidst a global contraction in merger and acquisition (M&A) activity, which saw global deals dip to a decade low of $3.2 trillion last year, the Asia-Pacific (APAC) insurance sector exhibited a relatively muted decline. 

Joyce Chan, Partner at Clyde & Co. in Hong Kong, noted, "Last year, the APAC region saw the smallest decline in deal making year on year falling around 13%."

Despite this resilience, the second half of the year painted a grimmer picture for the region. "APAC insurance M&A deal flow fell by 20% from the first half of the year," Chan explained, contrasting sharply with a global uptick in other regions. For instance, Europe experienced a notable 22.9% growth in the same period, and the Americas saw a 5% uplift in deal activities.

The underlying cause of the decline in APAC could be attributed to diminishing investor interest, particularly from Europe, as well as overall increased uncertainties and a slowdown in deal activities. "A lot of industry players are in wait and watch mode, as they reconsider their growth strategies, which include M&A, partnerships, and strategic alliances," Chan added.

Specific sectors within the APAC insurance market faced varying impacts. The health and life insurance sector, despite a 30% decrease in the number of deals, continues to be a primary driver of insurance M&A in the region. Conversely, the property and casualty (PNC) market maintained solid activity levels.

In the insurtech space, APAC insurers are reassessing their strategies to bolster their market positions, aligning with a broader global trend of integrating more advanced technological capabilities. "It is observed that APAC insurance is demonstrating greater interest in technology, which is in line with the global trends," Chan highlighted, supported by a 58% year-on-year increase in venture capital investments into the region's insurtech sector.

However, looming geopolitical tensions are casting a long shadow over future investment and M&A strategies. The potential impacts of upcoming elections in major economies like the US, Europe, the UK, and India, along with ongoing regional conflicts such as the Russia-Ukraine war and tensions in the Middle East, are prompting a cautious approach. 

"These conflicts are unlikely to resolve quickly and will continue to challenge the insurance markets at large, both directly or indirectly," Chan remarked.