Insurance sector ripe for mergers and acquisitions
ACQUISITIONS: More mergers and acquisitions are expected in the insurance sector this year following the introduction of new accounting standards, coupled with unpredictable economic condition on the back of Covid-19 shocks.
Analysts say conditions may precipitate more mergers and acquisitions up to 2022 on account of similar industry trends observed last year.
The insurance industry posted more mergers and acquisitions (M&A) activities, but uncertainty from new health and economic risks may strain the local market amid pre-existing pressures.
“We expect 2021 to be a positive year for insurance M&A. Companies are powering through the pandemic-driven disruption to pursue growth opportunities that are likely to emerge,” reads a Deloitte survey conducted prior to the pandemic.
The report predicts a surge in appetite for InsureTech acquisitions to meet customers’ digital engagement demands and support employees’ new work-from-home needs.
Closer home, recent deal between the UK global insurance solutions provider Linkham Group and the Resolution Insurance Kenya confirms these predictions. The two companies are, however, yet to disclose the cost of the deal.
Majority buyout of the general insurance firm follows a regulatory nod with a promise by Linkham to inject resources to “revamp and refuel” the insurer’s growth.
The deal also saw Peter Nduati appointed the new Resolution Insurance Kenya chief executive and will be expected to facilitate rapid recovery of the Resolution Insurance Kenya business thanks to his professional and business management experience, having previously served as the firm’s Founding Chief Executive Officer.
Linkham Group CEO Michael Cranfield said the acquisition is part of the Mauritius headquartered firm’s Africa expansion plans.
Globally life insurance is larger than general insurance but in Kenya, life insurance is smaller than general insurance, but analysts say it will continue to grow as the market matures.
Notable M&As include ICEA and Lion Assurance Company to form the ICEA LION group, Apollo Insurance Company and Pan Africa Insurance Company to form APA Insurance, Old Mutual acquired UAP Insurance, LeapFrog Investments LeapFrog Investments, a private equity firm, acquired Resolution Insurance, Saham Group of Morocco acquired Mercantile Insurance Company, Prudential Plc. of UK acquired Shield Assurance Company Ltd and Britam Investment Group acquiring Real Insurance Company among others.