The reinsurance industry will likely see more merger and acquisition (M&A) activity in the coming years as competitive pressures within the sector increase, according to speakers at the Standard & Poor's Ratings Services' 30th Annual Insurance Conference this week.
Competitive pressures including weakening profitability, steadily flowing alternative capital, pricing pressure, and persistently low investment yields mean that a mixture of M&A and strengthening underwriting will be the keys to keeping the sector viable while satisfying investors' appetite for bigger returns, executives said.
One of the commentators on M&A was John Charman, chief executive of Endurance Specialty, which is currently attempting to execute its own $3.2 billion high-profile acquisition bid for Aspen Insurance, which has so far been rejected by the Aspen board.
Charman said there are two views of M&A. One's positive in that it's seen as the best use of capital to strategically deploy to "create a more relevant, stronger business, but much better prepared and able to deliver profitability that shareholders require."
But on the flip side, he noted: “As an industry, I'm horrified. My view is that I'd rather deploy capital in a strategic way and be well prepared for a change in the marketplace on both sides of the balance sheet.”
A conference survey of delegates revealed that 51 percent of attendees believe there'll be active M&A in the next year, with as many as five major transactions.
To continue reading, you need a subscription to Intelligent Insurer. Start a subscription today for £655.
In-house feature articles, the archive and expert comment require a paid subscription. Subscribe now.
Want to give it a try? We are offering a two week free trial to the Intelligent Insurer website – register and select “Two Week Free Trial” to begin access to the full Intelligent Insurer archive and read the latest news, features and expert comment. Begin your free trial here.
Is your 2 week free trial about to end? Upgrade to a 12 month subscription for £655 now.
If you have already subscribed please login.
If you have any technical issues please contact support.
Standard & Poor's, S&P, John Charman, North America, Endurance