Around 81 percent of insurers globally intend to undertake between one and three acquisitions in the next three years, according to analysis by KPMG.
In its study, comprised of interviews with around 200 insurance executives globally, the firm said insurers are looking to M&A to release and deploy capital in a market swamped by record high levels of capacity.
Of these, 70 percent of the executives canvassed said they want to use acquisitions to transform their organisation rather than simply enhancing their current offering and operating model.
KPMG said it expects the vast chunk of these deals to take place in North America, estimating that the continent will account for 83 percent of global industry M&A activity by 2021.
The firm said it also anticipates an uptick in cross border mergers and acquisitions, with the majority of insurers expected to be involved in some form of non-domestic deal over the next three years.
However, KPMG warned that “doing deals has never been easy” and that insurers are increasingly having to become more strategic about deal sourcing.
“High performing companies don’t jump at every opportunistic deal,” the report said.
“They approach M&A target sourcing with purpose, yet our data suggests that decision-makers are rather worried that they may not be able to find their right acquisition target to match their needs.”
Giuseppe Latorre, head of corporate finance at KPMG in Italy, said that for acquisitions to be successful in transforming businesses, insurers must look beyond improving combined ratios or net profits in the short term.
“You need to be thinking about what that deal is going to generate in terms of contributions to margin 10 to 15 years from now,” he said.
“That’s not easy.”