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SINGAPORE – Insurers and insurance asset managers are expecting a wave of mergers and acquisitions (M&A) activity to rise in Singapore and Hong Kong in 2024, in line with a global consolidation trend.
According to the Clearwater Analytics Insurance Outlook Report 2024, more than 60 per cent of the respondents in a survey expect M&A activity in their domestic market to rise in 2024.
“Expectations are high for 2024 in the insurance industry in Hong Kong and Singapore. A bottleneck of M&A activity in both markets could be set to explode,” the study said.
The optimism was felt more strongly by larger organisations that manage more than US$100 billion (S$134 billion), compared with the smaller ones with less than US$1 billion in assets under management.
Clearwater Analytics, a software and data solutions provider, canvassed the views of decision-makers across 59 insurers and 23 insurance asset managers in Hong Kong and Singapore representing over US$2.5 trillion in assets under management. The survey was carried out from Oct 27 to Nov 9, 2023.
The survey showed that private equity firms have taken an increasingly positive view of the acquisition potential of insurers in Hong Kong and Singapore.
“Insurers’ investment strategies are long term, which make their portfolios attractive to private equity firms, which often feel they can generate stronger returns through diversification into alternatives,” Clearwater Analytics said.
It stressed, however, that having an operational “clean bill of health” is essential when it comes to desirability to potential acquirers. It added that taking on a firm’s assets can be extremely laborious if its systems are stuck in the dark ages.
In recent years, Singapore has seen two major deals.
In 2020, home-grown insurer Singapore Life (Singlife) merged with Aviva Singapore in a deal valued at $3.2 billion. The deal was the largest insurance deal in Singapore and one of the largest in South-east Asia.
In September 2023, Aviva exited Singlife by selling its 25.9 per cent stake to Sumitomo Life Insurance Company for about $1 billion in cash. The transaction is expected to be completed in the fourth quarter of 2023, Aviva said.
Close to 30 per cent of the insurers in Singapore and Hong Kong see meeting regulatory changes as the biggest challenge in 2024.
Tracking, preparing for, and adapting to incoming regulatory changes was cited as a significant challenge by those managing assets worth US$50 billion to US$100 billion, reflecting the wider range of regulations they need to comply with, the difficulty in keeping track of all the regulatory changes and making the necessary amendments to internal processes, the study said.
Other challenges include meeting internal and external reporting demands and timelines as well as meeting the various requirements in the different regimes they operate in.
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