M&A in Bermuda expected to slow down in 2019: Clyde & Co

Mergers and acquisitions (M&A) in the Bermuda insurance sector is expected to slow down in 2019 following several years of significant deal activity - particularly in 2018 - and a pool that is getting smaller and smaller, according to report from law firm Clyde & Co.

The report, 'Shifting sands of M&A - A regional outlook', noted that major regions - Americas, Europe and Asia Pacific- all saw an increase in M&A activity, however the Middle East and Africa fell.

There were 10 completed deals in Bermuda in 2018, compared with 16 in 2017. Notable deals last year include AXA acquiring XL Group, Markel acquiring Nephilla, AXIS Capital gaining Novae, Argo acquiring Ariscom, and AIG acquiring Validus.

"We don’t expect to see transactions of the size we saw in 2018, but the key driver to sell remains – the historical Bermudan mono business model is under challenge and companies need to focus on where the future lies – in large global insurance groups," said Clyde & Co corporate insurance partner Vikram Sidhu.

There was a total of 382 completed deals in the insurance sector worldwide in 2018, up 9 percent from 350 in 2017.

The Americas were the most active region for M&A, with 189 deals in 2018.

Asia Pacific experienced the biggest gains year-on-year with 59 deals, up from 42 in 2017.

Europe had 122 completed deals in 2018, up from 118 in the previous year.

Sidhu continued: “Carriers are increasingly targeting the entire insurance value chain for opportunities. The spate of deals involving Bermudan targets has been driven by the realisation that being a stand-alone reinsurance company may no longer be viable and diversification and larger scale will be essential going forward. And a growing acceptance that alternative capital is here to stay has seen some re/insurers move in on ILS targets, with Markel’s acquisition of Nephila being the largest. Overall, the continuing pricing and competitive pressures continue to provide an impetus to deal-making.”