Devonshire Underwriting Co-founder and Partner James Dodd recently spoke to Scott McGee, News Editor of Insurance Post on the publication’s podcast about Mergers and Acquisitions (M&A) trends in the UK insurance sector, after 2024 concluded with the mega merger of Aviva and Direct Line Group.
James was joined by other experienced industry professionals including Michael Sicsic, Managing Partner of the Sicsic Advisory and Howard Lickens, Executive Chairman of the Clear Group.
Here are some of the key insights from their discussion.
M&A trends
Speaking about the M&A landscape and the trends ahead between insurers, brokers and MGAs, James predicts that while there might not be deals on a similar mega merger scale in 2025 to last year, he does foresee some mergers for insurers – as well as MGAs seeing more of the action.
James said: “I think there will be some mergers in the insurer space, but that’s probably more of an additive for strategic reasons. In the last five years we have seen the largest number of mergers in the broker space and would expect one or two this coming year, but not a huge number. Across MGAs, we will continue to see more action there.
One area where we will probably see some acquisitions, albeit not many on the mega merger size, is for insurers that are involved in ‘fronting’.”
Fronting insurance in the context of Managing General Agents (MGAs) refers to an arrangement where a licensed insurer (the “fronting carrier”) issues policies on behalf of an MGA but transfers most or all of the underwriting risk to a reinsurer.
The fronting carrier provides the regulatory approvals and balance sheet capacity required to issue policies, while the MGA handles underwriting, distribution, and claims management. This model allows MGAs to access markets without needing their own insurance license, while fronting carriers earn fees without taking on significant risk.
Across the pond In the US, there is some movement in this arena, as James explained: ““There is quite a lot of noise from US brands wanting to come to the UK and Europe to replicate their model. One of the ways that they are looking to do this is by acquiring a UK or European insurance company and using that as a front.”
Acquisition drivers
More acquisitions could also be afoot.
James said: “Lots of players are now looking at their portfolio and where dots can be aligned and so I think there are going to be acquisitions across brokers, MGAs and insurers. That’s where we are also going to see a lot of action from private equity (PE) houses.”
The driver behind these acquisitions, however, is not just operational efficiencies.
James added: “There will likely be more acquisitions of teams in order to drive growth – whether that be new territories or classes of business. I think that’s going to be the real driver of acquisitions going forward, rather than operational efficiencies.
Listen to the full Insurance Post Podcast episode here: https://shows.acast.com/insurance-post-podcast/episodes/ma-trends-in-the-uk-insurance-sector
