Converging Forces Drive Mergers & Acquisitions for Insurers in CIS Region, Says AM Best Senior Financial Analyst
March, 28th 2019
In this episode of AM BestTV, Valeria Ermakova, senior financial analyst, AM Best, said business costs, bank consolidation and increased regulatory scrutiny have furthered mergers and acquisitions (M&A) among insurers in the Commonwealth of Independent States (CIS). Click on http://www.ambest.com/v.asp?v=cis_english319 to view the entire program.
“Whilst the overall economy in this area has improved compared with prior years when it was affected by low oil prices or Russian sanctions, challenges for the insurance industry still remain”
Tweet this Ermakova highlighted the volatile operating environment in the CIS and the challenges companies face.
“Whilst the overall economy in this area has improved compared with prior years when it was affected by low oil prices or Russian sanctions, challenges for the insurance industry still remain,” said Ermakova. “Amongst those challenges are limited options on investments, capital markets that are relatively underdeveloped compared with Western economies and insurance companies’ holdings that are often subject to weak credit quality.”
Ermakova also spoke about the M&A trend in recent years and the drivers of this consolidation.
“M&A activity has been particularly apparent in the CIS region in recent years, due to a number of different drivers. First, the typical high costs of acquiring business in the CIS region and relatively high claims inflation have put pressure on the technical results of insurance companies; second, consolidation among the banks that own insurance companies has created more M&A and third, increased regulatory scrutiny has resulted in some companies voluntarily exiting the market. AM Best does expect this trend of market consolidation to continue,” she said.