8 January 2015 News

Market consolidation will reshape market

Further consolidation will reshape the market in 2015 as re/insurers continue to seek value.

That was the opinion of Nick Frankland, CEO of EMEA Operations at Guy Carpenter, speaking during the broker's annual renewals discussion today (January 8) in London.

He said he anticipates significant consolidation in the market with scale becoming increasingly critical as margins become ever-more compressed. He added that it will become increasingly tough to operate as a small player in such a market as cedants rationalise their panels.

“There will be more tiering taking place towards a smaller core panel of reinsurers. Last year was heavily focused around the top six reinsurers and maximising relationships with these. This has widened because insurers want to spread risk. That top tier is now closer to 20 players. But this dynamic will stimulate M&A activity,” he said.

Frankland said both reinsurers and brokers were also increasingly seeking diversification as they attempted to cope with the lower cost of capital business model used by vehicles funded by so-called alternative capital. “We're at the point of a very fundamental change within this industry,” he said.

Speaking of the future of the market, Chris Klein, head of market relationships at Guy Carpenter, added that it would be hard to predict changes in the market in the next five years, but said that increased technology, better underwriting and an increased knowledge of risks would be likely outcomes.

Frankland agreed saying that many of the current trends would continue including a growing focus on the casualty market for some reinsurers and consolidation between smaller entities.

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