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Evolve Q4:2022 Insurance Claims Transaction Market Update

Published November 2022

Evolve Q4:2022 Insurance Claims Transaction Market Update

Evolve is excited to release our “Q4:2022 Insurance Claims Transaction Market Update,” which elaborates our perspectives on valuation trends and market activity in 2022 amid the volatile and uncertain macroeconomic environment. This report focuses on specialized P&C claims management and adjusting services with a deeper dive on catastrophe, where Evolve continues to be active. Key recently closed transactions advised by Evolve:

  • On October 31, 2022, Longshore Capital Partners acquired Southwest Adjusters, a leading multi-line independent insurance adjustment agency. Evolve served as the exclusive financial advisor to Longshore.
  • On May 2, 2022, Vertical5 acquired Knight’s Solutions, a provider of roofing inspection programs for insurance carriers and adjusters. Evolve served as the exclusive financial advisor to Vertical5.

More details below and in the report.

TPA & Loss Adjusting Market Trends

Economic and social inflations continue to worsen insured losses, which drive claims volumes and growth the of U.S. TPA & lost adjusting space. Net losses reached a historic $432 billion in 2021, 13% higher than the 2020 levels. Losses are expected to worsen in 2022 with a projected combined ratio of 100.7 (vs. 2021’s 99.5). Rising replacement costs due to inflation and supply chain disruptions, coupled with increased litigations and plaintiff-friendly legal decisions, are expected to drive insured losses into 2023. As a result, the U.S. TPA & loss adjusting market is expected to grow 3.3% in 2022, reaching $274 billion. Amid the current inflationary environment, the pressure for efficiency and cost management incentivizes carriers to consolidate vendors, favoring those with diversified capabilities vs. point solutions / services. Refer to pages 10 and 11 of the report for more details.

Within the TPA & loss adjusting space, catastrophe has strong growth potential. Increasing frequency and complexity of catastrophe claims underscore carriers’ needs for outsourcing to specialized vendors. Due to the impacts of accelerating climate change, there is an upward trend in the number of weather / atmospheric events over the recent years, which worsens catastrophe losses and drives size, complexity, and frequency of insurance claims. Most large insurers employ in-house adjusters, but the unpredictable nature of catastrophic events and shrinking adjuster workforce are shifting the preference towards leveraging claims vendors as the more economical alternative. Refer to page 12 of the report for more details.

Given the stability and resilience of the U.S. claims space against rapidly changing and uncertain macroeconomic conditions, private equity has expanded participation in the space by backing proven, innovative, and technology-driven management teams at attractive valuations. Chapter 1 of the report lists key M&A transactions in the space as tracked by Evolve.

Download a copy of the report here. If you’d like to discuss the report in further detail, feel free to reach out to the Evolve team at research@evolve-capital.com.