In a tough transactional environment, where are the green shoots? Looking back

Macroeconomic factors continue to present challenging conditions for the (re)insurance industry and dealmaking in the sector, write Debevoise & Plimpton’s Clare Swirski, Ben Lyon and Laura Jackson.

Inflationary pressures and the Russia-Ukraine conflict have made valuations of businesses difficult, and rising interest rates have put a damper on M&A and other transformational transactions. Recent bank insolvencies have created further uncertainty in the financial services sector, including for (re)insurance companies (particularly in the insurtech space).

Further, regulatory changes have created ongoing challenges for global, UK and EU insurers and market participants. For example, new pricing rules for motor and home insurance came into effect in the UK in January 2022, and in July 2022, the Financial Conduct Authority introduced new rules including the Consumer Principle.

The ongoing review of Solvency II both in the UK and EU, as well as the increased regulatory scrutiny of private equity investors in insurance transactions globally, have also caused uncertainty.

While against this backdrop we have seen an overall decrease in deal activity in the sector in the last year, the transactional story is not all bleak, and Q4 2022 and Q1 2023 saw some significant deal activity.


In March 2023, Compre announced a $1.3bn loss portfolio transfer agreement with SiriusPoint on a portfolio of primarily reinsurance business, and in February 2023, European P&C run-off specialist Marco Capital announced the acquisition of Navigators International Insurance Company from The Hartford.

Accident and health and life

Although inflationary pressures are negatively impacting long-tail liabilities for accident and health and life insurers, higher interest rates have been helpful in terms of improving cash flow and lowering capital requirements, particularly for those with long-term business.

Life insurer backbooks remain attractive to consolidators and financial acquirers for this reason. In November 2022, Monument Re completed its acquisition of a closed-book Singapore long-term life insurance business from Zurich International Life. In April 2023, Phoenix Group completed its $300.5mn acquisition of SunLife UK.

Private equity firms have also taken a keen interest in acquiring and managing life and annuity carrier balance sheets as a source of permanent capital and a stable pool of assets. For example, in October 2022, Resolution Life announced its strategic partnership with Blackstone for its life insurance and annuity consolidation business.

Innovative structures

The challenging macroeconomic environment is also encouraging (re)insurance groups to put in place innovative structures to navigate these challenging conditions. 2023 opened with Fidelis completing the launch of a new MGU separate from the group’s existing balance sheet companies and the subsequent announcement in March 2023 of its IPO plans for its balance sheet business.

Fundraising and insurtech

Notwithstanding the challenges that elevated interest and inflation rates have provided to the fundraising environment, we have seen significant activity around start-up fundraising. This is particularly the case in respect of insurtech as the challenging macroeconomic environment is further embedding the need for efficiency and a better customer experience that technology may be able to provide.

In January 2023, TONI Digital, a Swiss digital insurance-as-a-service provider of personal and commercial insurance lines, closed its $12.5mn Series B funding round. In the same month, reThought Insurance, a technology-centric flood MGA, completed its $10.5mn Series B funding round.


ESG is providing a new lens through which investors and finance providers are approaching transactions. Once a “nice to have”, ESG matters are causing investors to divest certain assets, discourage engagement with targets with ESG-related issues and acquire ESG-sound businesses that typically can charge higher premiums.

ESG considerations now pervade throughout M&A transactions, expanding the scope of due diligence and creating a new area of focus for buyers to seek protection in the transaction documents through traditional methods such as warranties, indemnities and W&I insurance.

Further, and particularly for strategic players, the growing burden of ESG-related regulations is another factor which makes consolidation and scale more attractive.

While Q4 2022 and Q1 2023 did not have the level of deal activity seen in 2021, the challenging conditions presented opportunities for many market participants.

Look out for another Debevoise & Plimpton LLP article in the coming days where we look ahead to the rest of 2023 and discuss what deal activity we expect to see.