In an insurance sector that remains fragmented, the case for continued consolidation is strong.

While funding is likely to be challenging for some time to come, investment in M&A could help companies to develop complementary earnings streams, realise opportunities for cost-saving synergies and strengthen their presence in fast expanding emerging markets.

As banking groups seek to release capital and sharpen their strategic focus in the wake of the credit crisis, some may choose to sell their insurance subsidiaries. An increased availability of acquisition targets could in turn help purchasers to secure deals at attractive prices. Other opportunities include life insurance buyouts, which could increase as the move to Solvency II heightens the spotlight on capital-intensive run-off business.

Smart targeting, skilful execution and effective post-merger integration will be critical in ensuring the success of any deals and winning the support of analysts and investors, who will rapidly penalise any perceived failure to deliver value from M&A.

Insurance challenges

PwC has a global network of specialists who can help insurers to strengthen their businesses in key areas: