In 2021, European M&A activity in the insurance industry increased by 33%, with 379 deals announced. While COVID-19’s successive waves created market fears, the situation also led to an environment with significant liquidity and fiscal stimulus, and record low interest rates. We believe this has resulted in significant tailwinds, fuelling above-average returns for both private and public financial markets.
As European insurance businesses increase their focus on trading profitability due to regulatory requirements such as Solvency II and the introduction of IFRS 17, inflation, the imminent rising tide of interest rates, operational resilience challenges and ESG agendas, a further wave of consolidation in Europe could be on the horizon as small insurers struggle to meet capital requirements and bear increased regulatory reporting and compliance costs. The need to review options to exit non-core businesses through restructurings, divestitures or other transaction activity has never been more important.
Private equity appetite for insurance assets has remained high, which has led to a greater deal size capacity and transactional funding. This supports increased deal activity at new annual records for valuation multiples in hotly contested sectors such as insurance distribution.
In FTI Consulting's inaugural European Insurance M&A Barometer Report, we shine a light on the key trends in the insurance M&A market, its most notable transactions in 2021 and the players to watch.