Contributed By Matheson (Dublin - HQ)
In 2018, there has been continued interest in the run-off insurance market, with many deals involving the transfer of closed books of business through a share/asset purchase agreement and subsequent court-authorised port¬folio transfer. It is anticipated that the interest in run-off will remain due to the presence of a number of aggregators in the Irish market.
Looking forward, in the context of insurance M&A, the dis¬ruptive impact of Insurtech may result in increased M&A activity as the market evolves and insurers are obliged to invest in resources that enhance scale, growth and efficiency. Many Insurtech start-ups are extremely valuable, and it is likely that there will be acquisitions in this subsector.
As the March 2019 deadline for the exit of the UK from the EU approaches, many financial services providers are in the process of establishing subsidiaries and third country branches in Ireland in order to maintain access to the Single Market and mitigate the potential loss of passporting rights post-Brexit. Authorisation-related activity since the Brexit vote has sharply increased. It is estimated that over 50 UK-based insurance undertakings and intermediaries have chosen to relocate to Ireland as a consequence of Brexit. Several overseas (re)insurance groups have also chosen Ireland as the headquarters for their European business, including Beazley Group, XL Capital, Willis Group Holdings and Zurich. Oth¬ers have restructured to underwrite their “Europe ex-UK” business from Ireland.
Overall outbound M&A activity in the first half of 2018 was slightly up on Q1 2017. While the volume of transactions was down to 41, the value of those transactions has increased hugely (from EUR717 million to EUR3.5 billion). Ireland also set a record for the value of inbound deals in the first half of 2018, with deals worth EUR70.6 billion targeting Irish firms recorded. However, much of this (EUR67.1 billion) related to a single pharmaceutical deal. This healthy level of activity has been accompanied by strong economic growth. The European Commission estimates that the Irish economy grew by 7.8% in 2017 and anticipates further growth of 5.6% in 2018 and 4% in 2019.
In 2019, it is expected that macroeconomic issues and geopolitical risks such as divisions within Europe, concerns regarding the ongoing trade dispute between the US and China, the prospect of a hard border between Ireland and the UK and the potential for a surge in worldwide energy prices, will impact Ireland’s M&A landscape. The full impact of Brexit on M&A remains to be seen, given the ongoing uncertainty over the exit deal.