Insurance M&A record highest growth in Africa, Middle East in 2020

By Zainab Iwayemi

Mergers and Acquisition (M&A) insurance transactions in the Middle East and Africa grew the most in 2020 by 166.7 per cent, the latest edition of Clyde & Co’s Insurance Growth Report 2021 titled, “Finding opportunity in adversity”, has shown.

According to the report the annual volume of global insurance deals in 2020 reached its second-highest level in the last five years while the Middle East and Africa saw the biggest rise in percentage terms from a low base.

In a statement, Peter Hodgins, Clyde & Co Dubai corporate partner said the rise in the Middle East has long been predicted by legal commentators as low penetration rates and highly competitive markets have been seen as being ripe for consolidation.

Meanwhile, Boston Consulting Group (BCG) had earlier reviewed M&A trends and their challenges in Africa. “Africa is a challenging region to execute successfully M&A for many reasons, but it is also one of the fastest-growing and evolving parts of the world,” it said.

Identifying the key trends expected to accelerate in the future, BGC highlighted African-led acquisitions, the increasing emergence of Africa-focused private equity investors, technology start-ups drawing in multiple investors, Africa’s journey towards an integrated continent which is making regional platform plays a reality and state-owned enterprises being open for private capital once again.

On the part of Clyde & Co, the firm identified key drivers for rising global insurance M&A deals in 2021 to include: rising premium rates, and the Covid-19 pandemic driving insurance companies to review their strategies and to pursue opportunities to exit non-core businesses via restructurings and sales in Africa.

“Live carriers are looking for run-off deals to free up capital to redeploy in the hardening market,” which means, “legacy sales will grow and will be a feature of the market in the coming year,” the report highlighted.

Importantly, BGC said the market has great potential due to recent policies favouring M&A in Africa. “There are good reasons to be optimistic about Africa’s future and the future of the region’s M&A market. Africa’s youthful demographics and fast-growing consumer class bode well for bold investors. Economic integration through the African Continental Free Trade Area (AfCFTA) also creates a major opportunity to help African countries diversify their exports, accelerate growth, and attract foreign direct investment,” BGC noted