Tech acquisitions key for insurance companies says A.M. Best

Published: January 21, 2017

Updated: July 24, 2018

Author: Luke Jones

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Tech company acquisitions and mergers could be the future according to a report from A.M. Best. The company also says general mergers and acquisitions (M&A) in life and annuities insurance companies is slowing down.

A.M. Best says companies are holding off on consolidation because of low interest rates. The credit rating and data analyst says that technology companies could become a new consolidation trend for companies as insurers seek to find ways to modernize.

“M&A activity can lead to innovation, we believe going forward we’re more likely to see targeted M&A that’s not necessarily insurance-focused,” Rosemarie Mirabella Assistant Vice President of A.M. Best said. “It can be around technology, distribution, data-analytics, I think we’ll see more M&A activity in that particular area.”

Interest rates have already started to climb again – and that’s expected to continue to the liking of insurers.

“I think there’s a presumption economic activity will be increasing,” Mirabella said “At some point we want to see interest rates normalize, because we’ve had these very low rates for a very long time and it’s created a lot of pressure for the industry.” 

Global companies in Asia and North American has been increasing M&A activity in recent months, the report points out.

“That’s more about the desire to diversify, and not necessarily for regulatory reasons,” Mirabella said. “In the past, we thought potentially European cross border deals might be a headwind… but now that the US regulatory regime is viewed as equivalent it’s not as much of a headwind.”

“Sometimes we see companies acquiring other companies and it having unintended consequences where you do raise the bar, because you acquire technological systems capabilities or even just human capital beyond what you thought you were getting when you did the deal,” she explained.