Atlas Magazine July 2021

The insurance market consolidation in view of the post-Covid-19

The prospects of a strong economic recovery are reviving M&A markets, which remained quiet during the health crisis. In fact, the sector's consolidation movement has never stopped. However, it has accelerated significantly since the initial success of the anti-Covid-19 vaccination campaigns.

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In addition to the traditional reasons for company consolidation, such as market saturation and low interest rates, the pandemic has prompted the need to invest in technology.

The post-Covid-19 era for insurers, reinsurers and brokers requires accelerated digitalization of operations, artificial intelligence-based solutions, and powerful data analytics tools. The requirements imposed by the health crisis do not allow many small and medium-sized entities to keep up and remain competitive due to a lack of financial resources. It is in this ideal context for buying and selling that the market, still obsessed with the race for size, will be rebalanced. The current attempt to merge the brokers Aon-Willis at 30 billion USD is part of this move towards gigantism.

Today, all the elements seem to be gathered to accelerate the market consolidation movement which is gaining momentum in the United States since the adoption of President Biden's 2000 billion USD investment plan.

However, the need for external growth is hampered by the high price of the targets, who want to take advantage of growing demand on a buyer’s market. Finally, another reality is that mergers and acquisitions are complex operations that certainly bring about growth but showcase risks as well. The failures of Covéa (France) in the Scor and Partner Re cases are stark illustration of this.