Briefing: Why are major personal lines deals popular in soft market?

One of the key talking points in 2025 was that, while the amount of UK insurance M&A dropped, deal value significantly increased from 2024.

According to figures published by Ernst and Young (EY), published 7 January 2026, deal value grew from £4.6bn to £19.8bn year-on-year, while volume fell from 186 to 145 in the same period.

So, while deal volume has fallen, the data shows that firms still interested in doing megamegers – EY noted that deal value was driven by seven transactions above £1bn.

And one thing that is very notable about some of these huge deals is that they are aimed at personal lines expansion. For example, in July 2025, Aviva completed its £3.7bn acquisition of Direct Line Group (DLG) to help it expand in the personal lines market.

Then there is Ageas, which has made several deals to give its personal lines strategy a boost. For example, in December 2024, the insurer confirmed its 20-year proposed partnership with Saga – including the acquisition of underwriting business Acromas Insurance Company – had been formally agreed by both parties.

But the biggest deal came in April 2025, with Ageas reaching an agreement to acquire motor and home insurance provider Esure for £1.3bn.

Ageas said the deal would help it achieve a balanced and diversified distribution model, spanning direct price comparison websites (PCW), brokers and partnerships.

Challenging personal lines conditions

These big personal lines deals come amid a soft market and there is no doubt that these conditions are challenging, especially when it comes to motor.

For example, EY said in December 2025 that motor is expected to only break even in 2025 and be loss-making in 2026, with net combined ratios (NCRs) of 101% and 111% respectively forecast for the next two years.

The deteriorating outlook was driven primarily by continued inflation, combined with falling premiums over the course of the year as insurers look to be competitive in soft market conditions.

More recently, EY also noted on 23 March 2026 that the UK home insurance market is expected to return to loss-making territory this year.

It said that rising costs, market competition and geopolitical risk are all likely to contribute to a higher NCR for the market.

The figures are so bleak that Jason Storah, general insurance chief executive for UK and Ireland at Aviva, warned that personal lines “needs a bit of rope” – otherwise “the industry just can’t last too long”.

He told Insurance Times: “Rate has been going down in the personal lines market for 12 to 18 months across the whole market. [But] let’s say inflation is in the low to mid-single digits.

“So, as soon as you’re into year two of low to mid-single digit inflation, if [personal lines] rates are going down 11% a year and inflation’s gone up 3.5% in one year alone, you’ve created a 14.5% delta.

“The industry just can’t last too long [in these conditions], particularly when EY data is that the industry combined operating ratio for motor is going to be 111%, so that’s not a healthy motor market.”

Scale in personal lines

For myself, I find it interesting that as soft market conditions continue to hit the personal lines market, more major M&A deals are being done in this area.

And I feel this could reflect a drive for scale amid softening premiums, while at the same time enhancing pricing power to make the best of a challenging market.

When speaking to me for April 2026’s In Focus on the motor market, Andrew Brown-Allan, chief growth officer at telematics provider IMS, spoke about how Aviva could take advantage of the DLG deal.

He said: “If you look at the spread of brands and its ambition, then it has to work out first of all how you put those two portfolios together in a way that is not cannibalising one another, as well as making all the usual expected synergy savings you’d necessarily see out of such a combination.

“You absolutely would expect it to take advantage of scale. If it has, across the piece, a significant volume of driving data that it could then look at as a powerful risk indicator and start to apply to its standard motor book, that might be one of the ways it could start to leverage that.”

Giving his opinion on megamergers in Insurance Times’ Big Question recently, David Leslie, managing director at Leslie James Acquisitions, added: “In a buyer-friendly environment tempered by regulatory and macro risks, 2026 looks set to deliver more strategic combinations as insurers chase resilience and returns in an evolving market.”

So, I believe that more personal lines M&A deals will go ahead in 2026, with firms looking to use the power of two to combat softening premiums, claims inflation and fierce competition.