Poll suggests strategic consolidation will drive M&A activity in re/insurance industry in 2025
Industry analysts are optimistic that 2025 could see a positive shift in mergers and acquisitions (M&A) within the global re/insurance sector, driven primarily by strategic consolidation. Results from a recent poll conducted by Reinsurance News indicate that 49% of respondents perceive strategic consolidation as the main catalyst for reinsurance M&A activity in the upcoming year, with private equity interest following closely at 20%. Digital transformation was identified by 18% of participants, while regulatory changes ranked lowest at just 13%.
This anticipated trend aligns with predictions from Fitch analysts made in the previous year, suggesting that a softening market and decreasing organic growth prospects would motivate reinsurance M&A activity. The prevailing hard market in 2024 had slowed down M&A activities as reinsurers focused on organic growth due to favorable pricing and terms. However, other challenges, such as integration risks, concerns regarding casualty reserve adequacy, and regulatory uncertainties, also contributed to the slowdown.
Despite the overall decrease in M&A activity, a report from WTW highlighted a 15% rise in global M&A deals exceeding $100 million in the latter half of 2024. This surge was predominantly propelled by an increase in large transactions falling within the $1 billion to $10 billion range, with a total of 99 such deals being finalized. Jana Mercereau, Head of Europe M&A Consulting at WTW, emphasized that while financing conditions have improved, navigating complex M&A transactions in 2025 would remain challenging.
Mercereau elaborated further on the potential challenges dealmakers might face, including the risk of new tariffs and policies reigniting inflation, which could impact supply chain stability and consumer prices. Additionally, the growing influence of private equity in M&A is expected to have a significant impact. With vast amounts of capital waiting to be deployed, private equity firms are likely to leverage their expertise in intricate deals to drive aggressive timelines, forcing corporate buyers to compete with greater efficiency and agility.
In 2024, the UK financial services sector experienced increased M&A activity, reaching its highest volume since 2012. Damian Hourquebie, UK Financial Services Strategy and Transactions Leader at EY, noted that the surge in activity was a result of signs of economic recovery that bolstered market confidence, leading to higher valuations and increased inbound deals. While the optimism surrounding this trend is justified, Hourquebie cautioned that macroeconomic uncertainties and geopolitical tensions might pose challenges in 2025.
Looking ahead, if the UK’s economic outlook continues to improve as expected, sustained M&A activity throughout 2025 is anticipated. This is particularly true as confidence grows among firms, prompting them to accelerate their transformation plans in response to the changing landscape of the financial services sector.
