"Are you prepared for more software M&A?" I asked in my insurancenetworking.com blog back in March. But what I should've asked is "How are you preparing for more software M&A?"

The first half of this year has been filled with merger and acquisition activity among insurance software providers. During the first week of March alone, the industry saw three large acquisitions: Applied Systems acquired IVANS' P&C business, SAP acquired Camilion and Insurity acquired AQS. In April, Quindell Portfolio Plc., a London-based consulting company, announced it would acquire Iter8 Inc., a Software-as-a-Service provider to the North American insurance broker and agent market. And, as I write this, Guidewire just announced it would acquire Millbrook Inc., a provider of data management and business intelligence solutions for P&C insurers.

That's a lot to take in and analyze. While most — if not all — of the vendors that go through M&A, on either end, will say customers benefit by receiving greater service or more advanced products, there's still going to be a transition period, and the industry could feel the ups and downs.

Novarica's report, "Insurance Software M&A 2013 Q1 Update," recommends insurers "protect themselves as much as possible through contractual means, including demanding base code escrow and service-level guarantees that survive change of control."

What we can conclude from all this recent activity is that as larger players enter the space and specialized vendors get bigger through more acquisitions, the insurance vertical applications space is evolving. Many industry experts agree insurers can expect even more activity in the market through the year and into 2014, and possibly more data-focused offerings.

Novarica's report also recommends insurers stay informed: "Understand which category the independent software vendors' (ISVs) providers are in, who is likely to buy them and why." For example, acquisitions of companies that enter the market with a new approach and quickly gain traction, or those that are founder-controlled and have a solid, but not rapidly growing, customer base are likely to result in increased investment in the product. Acquisitions of product providers with stable or slowly eroding customer bases that generate maintenance and services revenue, but are not adding new clients to their outdated products, are likely to result in forced conversions or migrations.

The report predicts continued M&A among portfolio players (which sell multiple solutions or sets of solutions), ISVs (mostly privately held companies that tend to focus on a single solution or set of closely linked solutions), and tech giants and financial investors (the larger companies serving a number of industries) for 2013-'14. And, from some of my off-the-record conversations with vendors at ACORD LOMA, I can echo that prediction.

On a separate note, I'd like to welcome two new members to INN's Editorial Advisory Board. Justin Manley, CIO - Americas at Torus Insurance, and Stuart Tainsky, CIO at Privilege Underwriters Reciprocal Exchange (PURE), will join our esteemed board members who are tasked with offering feedback about the content we provide on a daily and monthly basis.

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