The European Insurtech sector, which has seen shrinking VC funding and fluctuating deal volume in the last several years, is now experiencing a notable consolidation trend, with a wave of notable mergers and acquisitions (M&A) in 2024.
As companies look to stay competitive in difficult markets, mergers and acquisitions become central to an organization’s growth and sustainability strategy. Market consolidation, moreover, allows incumbents to enter new markets, acquire new customers, diversify their offerings, and reposition themselves in targeted segments.
The Insurtech consolidation trend in Europe has largely been understood as a way for incumbents to either streamline operations with technology and/or expand their digital capabilities. However, this move toward consolidation can also be seen as a way of addressing some challenges faced by insurers in heavily regulated European insurance markets where regulatory hurdles can impact growth and scalability – especially around customer acquisition.
With acquisitions in the direct insurance market in Europe and Germany, Allianz Direct, the digital insurance platform of the Allianz Group, has been growing its presence across both B2C and B2B2C channels. Just last month, they entered a purchasing agreement with insurer Swiss Re for its iptiQ European property and casualty business. Other recent acquisitions by Allianz Direct, including the French home insurance business of Luko, and FRIDAY, a leading digital insurance and pension provider and subsidiary of Baloise Group, are additional recent examples of Allianz Direct concentrating their position in highly competitive German and French digital insurance markets.
It’s important to note, however, that even despite market shifts and the pullback in venture capital funding (in the first quarter of 2024, total venture capital investment in Insurtech startups was down 18% – a six year low), in a broader sense, interest in and demand for insurance technology remains quite strong. With persistent climate concerns and geopolitical chaos dominating headlines, the sector has seen a surge in global financing for its startups, particularly for AI-focused Insurtechs, representing a five-quarter high in Q2 of 2024.
If 2023 and 2024 were marked by a “return to reality” in VC, where finding the next Insurtech unicorn was replaced with a buyer’s market focused on cutting costs and expanding market share, then 2025, according to most trends and predictions, will be a year of surging, technology-driven M&A activity. These deals will continue to gain traction, buoyed at least in part by steadier economic conditions, slowed inflation and stabilizing interest rates. In the midst of this economic landscape, and ever-shifting geopolitical influences, insurance companies are likely to be continuing their focusing on strengthening their existing market positions through the consolidation of core assets while finding new ways to leverage the use of technology (especially AI) for competitive edge. Doing so will reaffirm the industry’s current emphasis on strengthening core efficiencies over disruption.