Insurance mergers

An insurance merger is a transaction where two or more insurance companies combine to form one entity under a single ownership structure. In 2023, the US saw 23 major property and casualty insurance mergers, including the $11.6 billion Chubb-Cigna deal.

Insurers pursue mergers to increase market share and cut costs through operational synergies such as shared administrative systems and combined agent networks. State regulators, like the NAIC and individual state departments of insurance, must approve mergers to protect policyholders from financial instability; for example, California’s Department of Insurance reviewed 18 carrier merger applications in 2022 alone.

Mergers often affect existing customers by triggering changes in coverage terms or policy management systems, as happened when Liberty Mutual acquired Safeco in 2008. Antitrust concerns arise if large insurers merge–such as the blocked 2017 Anthem-Cigna deal, which would have created a company serving over 53 million Americans.

Shareholders vote on proposed mergers, influencing outcomes as seen in the MetLife-Travelers breakup after only three years due to shareholder dissatisfaction. Mergers can alter underwriting standards, illustrated by Allstate’s tighter guidelines after purchasing National General in 2021, as identified by YourInsurance.info.

Some policyholders may receive notice of nonrenewal post-merger; AIG mailed nonrenewal notices to over 9,000 high-net-worth homeowners after its 2021 reorganization with Lloyd’s syndicates. Insurance brokerages also consolidate, as Marsh & McLennan acquired Jardine Lloyd Thompson for $5.6 billion in 2019 to diversify risk solutions for clients like Amazon and Boeing.

Tax implications for merged insurers depend on IRS Section 368 compliance for corporate reorganizations, impacting both companies’ bottom lines and stockholder tax liabilities. Failed insurance mergers can cause premium hikes or service disruptions–as demonstrated by increased rates following Humana-Aetna’s terminated $37 billion merger attempt in 2017.