Brit Insurance is being sold to Canadian rivals Fairfax for the sum of £1.2bn. This latest exit follows a number of other high profile private equity exits including Bregal Capital’s sale in 2014 of Canopius to Sompo Japan Insurance and wider non-private equity transactions such as the recent XL/Catlin deal.

"CVC/Apollo's recently announced exit from Brit encapsulates the trend that increasing buyer demand is facilitating PE exits," comments PK Paran, head of insurance at DLA Piper EMEA. "Other insurers are making moves after a significant period of restructuring - Aviva/Friends Life is a great example of this -- and consolidation is likely to continue through 2015 and some of the deals may be catalysts that accelerate further M&A activity.

At the smaller end of the market, Paran says regulatory/capital requirements are driving some transactions but he believes this is less of a driver for the larger deals which appear to be more driven by commercial and strategic reasons. "There is still some regulatory uncertainty for the largest players with the possibility of evolving global regulation and capital standards and this may act as a drag on big ticket M&A activity," Paran says.

"However, industry sources indicate that whilst transformational deals may be unlikely due to the shifting global regulatory landscape, there is now more certainty around Solvency II and a greater appetite to do deals, as large insurers can't hold fire forever when organic growth is slow due to falling premiums in some traditional product lines and markets, combined with low yield and low interest rates on the investment side."

According to Stuart Reid, executive chairman of insurance broker Bluefin, acquisitions are a good option as growth in the market is not easy. "If you look back over the last ten or twenty years of insurance companies in the UK, the number has remained relatively stable. Whilst there is consolidation, the number has tended to remain similar in the past. Consolidation is now coming thick and fast however, not just amongst insurers, but also in the insurance broking market.

“The reasons are surplus cash to buy businesses, insurance is generally a very cash-generative business, and acquisitions are a good way to grow as growth in the market is very difficult,” he explained.

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