African insurance merger and acquisition (M&A) activity is expected to increase, but the mix of buyers, the reasons for deals and the tools used to assess them are changing.

My colleagues and I have supported acquisitions, mergers, wind-downs and market entries – advising buyers, sellers and regulators across the continent. We highlight three shifts driving insurance deals, and what they mean for your due diligence approach.

1. Private equity: from gold rush to guarded returns

Africa, like many regions, has seen a surge in private equity (PE) interest in insurers over the past decade – enticed by low penetration, favourable demographics and hopes of rapid growth towards South African levels.

However, high-profile failures (mostly outside Africa) and underperforming investments have made investors more selective and regulators more sceptical. Consequently, some PE firms have exited insurance entirely, while others now focus on distributors instead of capital-intensive underwriters.

Regulators are also asking tougher questions. Is this deal in the public interest? Will the insurer be more stable and better capitalised? Does the investor bring more than just money?

Due diligence implication: The bar has risen. Buyers must show that the deal stands on its own merits, with credible assumptions and realistic plans. Due diligence must go beyond financials to assess governance, reputation and post-deal credibility. Sellers seeking PE backing need a narrative that works for both investors and regulators.

2. Regulatory reform: IFRS 17 and risk-based capital

Many African countries have adopted IFRS 17, or are doing so. The transition hasn’t been smooth. Costs have risen, internal teams are stretched, and reported profits are temporarily harder to interpret and compare.

Nevertheless, IFRS 17 improves comparability. It brings more granular disclosures and clearer views of profitability.

However, accounting judgments still vary (contract boundaries, risk adjustments, coverage units). Many insurers are still learning how to manage and explain the changes to their contractual service margins (CSMs).

Risk-based capital (RBC) reforms are moving in parallel. More regulators are shifting to capital frameworks based on actual risk. However, implementations across Africa vary. Some are loosely calibrated, others stricter but poorly understood. For smaller insurers, implementing RBC demands better data, systems and actuarial input – all at a cost.

Crucially, RBC reframes profitability. Products that previously looked attractive may appear unviable when capital intensity is considered.

Due diligence implication: Headline profits aren’t enough. Buyers must evaluate CSM sustainability, key assumptions and how accounting choices shape reported results. Capital adequacy must reflect strain by line of business. For sellers, these reforms are fueling consolidation. Those with a clear view of profitability and capital use under IFRS 17 and RBC will attract stronger valuations.

3. Consolidation and the search for scale

South Africa’s life market is mature, with limited growth in underwritten life. Lower-cost players are winning in funeral and credit life, where scale and pricing advantages are hard to beat.

Elsewhere in Africa, many insurers remain sub-scale, with high fixed costs. Compulsory products may boost volumes but don’t guarantee trust or profitability.

Albeit for different reasons, consolidation is increasingly seen as necessary in South Africa and across much of the continent.

Insurers are also exploring new channels to reach scale: telcos, retailers, community groups and digital platforms. Some partnerships show promise, but results vary. It’s unclear who captures the value or whether the models will last.

Larger players are building regional hubs and pursuing cross-border acquisitions for cost leverage and growth. At the same time, we continue to see new licence applications from distributors seeking independence.

Due diligence implication: Buyers must test whether a target adds scale or only complexity. Key issues include marginal cost, operational overlap and integration feasibility. Sellers should highlight differentiated capabilities, licences or relationships. Partnership structures require scrutiny: who ‘owns’ the customer, who controls the value and what happens if things unravel?

Getting insurance M&A right in a changing market

African insurance M&A isn’t getting easier. Investors are more cautious, regulators more demanding, and financial reporting more complex. The drivers of insurance M&A haven’t changed – but the standards, scrutiny and execution risks have never been higher.

Success now demands a clear view of insurance fundamentals, regulatory expectations and integration realities.

At Milliman, we work with clients across Africa to cut through the noise, bringing actuarial, financial and strategic clarity to complex transactions. Whether you’re buying, selling or exploring your options, the right questions and the right support make all the difference.

This article was originally published by Business Day Insure magazine.