How COVID-19 Will Impact M&A in the Insurance Sector

From a short-term perspective, the COVID-19 crisis has triggered difficulties in executing deals, which have constrained M&A activity. Going forward, from a long-term perspective, the COVID-19 crisis could accelerate underlying M&A trends, including industry consolidation:

1. Insurance leaders will increasingly look to dispose of older and legacy businesses or portfolios that are not essential to their forward-looking value propositions.
2. Larger, market-leading insurers may consider acquiring competitors to strengthen their competitive positioning coming out of the COVID-19 crisis. Additionally, the crisis could trigger urgent M&A consolidation due to rating agency downgrades and capital or liquidity stress.

COVID-19 may change the M&A process as insurers evaluate acquisition targets with a focus on operational resilience, social purpose, product innovation, scenario analysis, and workforce flexibility.

Despite the short-term negative impact, the COVID-19 pandemic could give rise to rapid consolidation, innovation, and growth across the insurance sector. It is also expected that the lessons learned from the industry’s response to the pandemic will profoundly change insurance M&A transactions, making the industry better equipped to handle situations similar in nature to COVID-19 in the future.

SOURCE: https://www.ey.com/en_gl/insurance/how-covid-19-will-impact-m-a-in-the-insurance-sector