The P&C carrier M&A cycle is heating up, with September and October marking the busiest stretch ever recorded by sister title Insurance Insider’s M&A tracker.
London market names such as Atrium, Inigo and Convex have all struck sales agreements, starting to unravel the PE investments in the class of 2020-era carriers.
They contributed to the 44 deals announced over September-October, compared to just 14 at the same point last year.
But this M&A cycle is one that could have implications for ILS managers as well. To date, the only ILS M&A deal of note in 2025 has been intra-sector: the combination of Twelve and Securis completed in February, after being announced last year.
Yet the increasing interest from (re)insurers in seeking acquisitions as organic growth opportunities slow means there is a possibility they will become more open to ILS firms as a source of new income.
This comes at a time when MGA businesses remain well-valued. Many (re)insurance entrepreneurs have headed to this segment to grow businesses in the past few years, and Aon estimates premiums written through MGAs accelerated notably in 2024.
MGAs are akin to ILS firms, as both are fee-earning propositions rather than risk-takers, although the ILS focus is more skewed to investor relations and dealing with a different end-allocator base, whereas MGAs may have to spend less time on carrier relations because their paper providers have similar underwriting expertise that they’re choosing to delegate.
But even though MGAs have been riding high, the same wasn’t necessarily true for the ILS markets. There was a dimmer view of their forward earning potential after the 2017-2022 slew of loss-impacted years.
Now after two strong years of attractive gains, there’s a better outlook for ILS firms. Asset growth at the top-tier ILS firms picked up to the 3%-4% range in H2 2024 and H1 this year, after an up-and-down phase.
The market is also closing in on a third year of notable gains, which will boost three-year track records and diminish the relevance of the lower-yielding prior years in the five-year views.
And at the same time, rated carriers are at that point in the cycle when organic growth is becoming harder to find, pushing them to deploy excess capital through acquisitions.
At its April investor day, for example, AIG executives said the firm has “gotta have more growth”.
It’s notable that in some of the M&A deals to date this year, there’s been a focus from acquirers on the benefits of fee income at their targets. In other words, what sister title Insurance Insider has called the “carrier-plus” model is coming to the fore.
Indeed, the fee-benefit narrative was part of the dialogue around the Sompo-Aspen deal, as it brought with it Sompo Aspen’s built-in ILS platform.
Similarly, one Lloyd’s deal – Atrium – was structured specifically as a pseudo-MGA sale, as only the managing agency stakes were in scope. Meanwhile Skyward CEO Andrew Robinson specifically mentioned fee income and potential to attract third-party capital as possible boons from its Apollo acquisition.
Obviously some firms have already made their ILS bet – with Markel and Mitsui Sumitomo Insurance acquiring top-tier ILS firms. Others such as RenaissanceRe, Swiss Re or Scor have built up leading in-house platforms.
But there are still plenty of insurers who haven’t got an ILS capability and some reinsurers whose platforms are sub-scale. Brit and Lancashire count among those that had ILS functionality but closed it down.
One of the historical reasons carriers didn’t acquire ILS firms was the sentiment that they could build it themselves. They thought it wasn’t worth paying franchise value to an ILS entrepreneur simply to speed up that journey to AuM growth.
However, the post-2017 travails of the ILS market could, perhaps ironically, have overturned some of that sentiment. The years since then underscored that there will be cycles to ride out within ILS and that managing those phases successfully requires significant investment in building a strong franchise.
We’ve already seen the 2025 insurer M&A cycle take on some unexpected flavours in the form of mortgage insurers emerging as buyers (Radian-Inigo) and Convex’s majority stake going to an alternatives asset manager balance sheet.
Could an ILS acquisition be the next?
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