The global insurance market will see M&As continue as the Asian insurance market comes to the fore over the next decade according to one industry leader.
John Donnelly Asia Pacific head of placement for Marsh told Insurance Business
that the current conditions in the global market will see Asian insurers able to capitalise.
“In ten to fifteen years’ time, I will be very surprised if seven or eight of the top ten global insurers weren’t Asian,” Donnelly said.
“That will happen through acquisition but it is also going to happen organically for them.
“China is the greatest example, in China the insurers are growing more through an increase in sophistication in the buying market than they are through anything.
“Chinese people didn’t buy insurance and now there are more middle class in China and more of them are buying insurance. That marketplace is expanding and yet the economic growth is roughly 7%, I think you have roughly 14-16% of market growth as well.
“We haven’t got that in other markets so what that does is give them more capital to be able to spend on acquisitions.”
As capital continues to flood the global market, Donnelly said that he expects the recent spate of M&As across the industry to continue, even though mega-mergers have seemingly died down.
“It seems to have slowed down because there has been nothing significant announced in more recent times. However, I’d expect there are still to be transactions to be done in the same way that if we were in any industry.
“If there is a lack of economic growth and therefore a lack of organic growth in a business, that is when you see an uptick in M&A activity. You are seeing this in all sorts of industries and you’d expect to see it continue in insurance because the more mega-mergers there are the less possibility there is of more transactions taking place.”
Donnelly said that there are “a whole heap,” of insurers and reinsurers globally that will look to M&As as they are currently “sort of in no man’s land.”
“They are not big enough to be able to compete with the major global insurers and reinsurers what’s happened is because of the softness of the market, where they have their niches the biggest players have come and eaten their lunch, so where do they go?
“They’ve looked at doing a couple of transactions themselves but it hasn’t worked for one reason or another.”
Donnelly said that “it is impossible to tell,” when changes will impact the current soft market experienced globally as surplus capital continues to have a major impact.
“What is driving the market conditions globally is a surplus capital that is invested in the insurance and reinsurance industry.
“That is not going to disappear until it can find something else to invest in until it can find something to make the same kind of returns that they are making out of insurance.
“While the results of a lot of the major insurers locally and globally are terrible, the investors have got nothing else to do with their money so until that situation changes, you are going to have supply significantly exceeding demand and in any economic equation, that means depressed prices.”
‘Two-speed’ Chinese economy presents Asia Pac insurance opportunities
‘Very competitive’ marine market presents ‘huge opportunities’ in region