Strategic opportunity
shapes next wave of
APAC non-life insurance M&A
As markets evolve, what strategies can insurers deploy to maximise the value of deals?
Written by Blake Evans Pritchard
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This (Re)in Asia Whitepaper examines current trends and strategies in non-life insurance mergers and acquisitions across the Asia-Pacific region. The report takes an editorial-first approach, drawing on expert insight and market data to outline key drivers, regulatory changes, M&A opportunities, and the evolving role of private equity in APAC insurance transactions. But it is made available for you to read without a subscription through our commercial partnership with Guy Carpenter.
Key Findings
Insurers in Asia-Pacific continue to show strong interest in mergers and acquisitions. Buyers now take more time to review targets and focus on deals that fit their group strategy, geographic reach, and capability needs.
Regional M&A deals have slowed down in recent years, but new regulations such as risk-based capital rules and IFRS 17 are driving potential consolidation, especially among smaller insurers.
Southeast Asia has a high number of insurers in markets like Indonesia, the Philippines, Thailand, and Vietnam. This competition, along with regulatory support for consolidation, is leading to more M&A activity and market exits by smaller players.
Many APAC markets restrict foreign ownership in insurance companies, which can limit deal activity. Some countries, such as Thailand and India, are reviewing these caps to attract more foreign investment and boost M&A activity.
M&A Private equity funds are becoming more active in APAC insurance M&A, often acting as catalysts for consolidation and distribution growth. While their investment horizons differ from insurers, their involvement is creating new opportunities and competition for assets.
Deal valuations in APAC have dropped over the past decade, and acquirers are now more disciplined. Successful M&A depends on achieving operational and distribution synergies, strategic alignment, and having local market expertise to integrate new businesses.
A more focused M&A strategy
Interest in insurance M&A remains as high as ever in Asia-Pacific. However, as the market has evolved, buyers have become much more discerning about the companies that they go after.
Data from S&P Capital IQ shows that there was a surge of M&A deals in 2021, in the wake of record-low interest rates and surplus liquidity triggered by Covid-19.
Private equity funds were particularly quick to take advantage of these cheap financing conditions, while some insurers used the opportunity to expand in core APAC growth markets through acquisitions.
For instance, Tokio Marine increased its stake in its Indonesian operations from 60% to 80%, while Generali strengthened its presence in Southeast Asia with the purchase of AXA’s Malaysian business.
While the number of deals being done has since levelled off, analysts say that interest in business growth through acquisitions still remains very strong. This is being driven by the search for top-line growth, the desire to diversify across business lines and geographies, and the introduction of new capabilities.
The common explanation for shrinking M&A activity is that insurers are spending a lot longer scrutinising potential deals than they did in the past. This suggests that a fresh flurry of transactions could be just around the corner.
“Although there are fewer deals being done now than there were five years ago, interest has not gone away,” says Paul Ricard, Asia Pacific Head of Insurance & Asset Management for Oliver Wyman. “It is just that insurers are much more focused and thoughtful than they were in the past.”
While appetite for insurance deals remains strong in Europe and North America as well, the fast-growing nature of APAC has focused particular attention on this part of the world.
The need for consolidation and scale in several markets, particularly those in Southeast Asia, are also throwing up exciting new opportunities for acquisitions.
“Asia continues to offer strong growth potential in some markets versus mature markets, supported by low insurance penetration, regulatory encouragement, and rising middle-class demand in fast-growing economies. This makes Asian insurers attractive acquisition targets for insurers in low growth markets that are seeking inorganic growth and diversification,” says Allison Drill, Head of P&C Structured Solutions for Swiss Re.
Generali also continues to see “tremendous opportunities”, according to Alex Chan, Head of Insurance M&A in Asia for the Italian insurer.
“Asia will remain the best long-term growth opportunity for the insurance industry in the foreseeable future, especially for multinational players such as Generali,” he adds.
Insurers from Europe, North America and within APAC (chiefly those from China, Korea and Japan) have all been eyeing potential deals in the region.
However, deriving value from M&A deals in APAC requires a careful and well-considered strategy.
“M&A is not just about the acquisition. It is also about consolidation and integration as well,” says Ricard. “Quite a few players have learnt lessons from deals that might not have panned out as planned, and from which they had to exit.”
He adds that there is now a much greater appreciation among insurers than there was in the past that, to be successful in insurance deals, firms need to have people who not only understand group strategy but also the local market.
“While we might not be seeing as many deals, we have seen a lot of activity from many firms around re-organising their management structures, putting boots on the ground and having a healthy mix of internal and external talent,” says Ricard.