Insurance Revolution #9: Insurtech Mergers and Acquisitions.
Legal News & Analysis - Asia Pacific - Insurance & Reinsurance - Corporate/M&A
24 October, 2018
Who shall acquire who?
We have now reached the final chapter of our Insurance Revolution newsletter series devoted to insurtech, so let us wrap it up with one of the most important transactions the insurance industry will be seeing from this new business platform, i.e. mergers and acquisitions. A good starting point for M&A is to ask whether insurers will acquire the insurtech start-ups or vice versa.
Statistically, a substantial percentage of insurers fear that they would lose market share to insurtech start-ups. This fear is not unfounded. Annual investments in insurtech have increased over the past years. Insurers have therefore taken steps to address the challenges and to grasp the opportunities that emerge. If insurers are unable to catch up with insurtech trends, they will most likely fall behind other insurers, including insurtech start-ups.
Insurers fear that they would lose market share to insurtech start-ups.
The way to insurtech
Insurers must step up to chase and take advantage of the opportunities. Insurers have some options, i.e. they can either develop their own insurtech and come up with new products, or, if they lack the resources or expertise to do so themselves, they can enter into a strategic partnership with an insurtech start-up. Such a partnership must be structured to suit the insurer's business model.
We may also see that big technology start-ups have successfully entered into the insurance arena with the goal of winning it all. One can only imagine what would happen if, one day, Apple or Microsoft decides to fully and officially enter into the insurance market. Would it be a big challenge for traditional insurers, brokers, and intermediaries that are too conservative to adapt?
Insurers that refuse to adapt or improve could lose it all.
For this reason, mergers and acquisitions serve as a method for insurers to expand their business with the assistance from insurtech start-ups. M&As will fuel growth, as a result of combining the traditional insurer's resources with the innovations and technology-related solutions of insurtech start-ups. Such combinations will also facilitate technology and knowledge transfer.
Insurers must, therefore, plan and prepare for the acquisition of their potential targets. This will elevate the insurance business platform and promote competition in a rapidly developing industry.
What about the legal implications?
Finally, mergers and acquisitions in the Thai insurance industry are regulated by the OIC. Each form of M&A raises a different legal concern, such as foreign shareholding limits; investment limits; personal sharing; and systems synergy. On this front, legal advisors play an essential role since they have the experience and expertise relevant to the legal challenges and are familiar with the insurance landscape. Professional legal advisors continuously stay abreast of the latest global trends, regulatory changes, and are familiar with the concept of insurtech. They might have even thought about potential structures for M&As between traditional insurance companies and insurtech start-ups. Engaging with an experienced legal advisor will help ensure that your new partnership or acquisition will lead to further success in the insurance industry.
For further information, please contact:
Sivapong Viriyabusaya, Partner, Baker & McKenzie