22 October 2014 Insurance

Re/insurers should not resist good M&A

If there is an opportunity to acquire or merge and the activity makes sense strategically, then companies should be open to the option of consolidation, says Gérald Kanis, chief reinsurance executive at Swiss insurer Helvetia, which recently acquired Nationale Suisse.

“It’s very important that the new company fits well with what you currently have. It must make sense from a strategic view and must be complementary so that your business can make the most of it. The storyline behind the activity is very important. Shareholders of both companies need to like the idea,” he said.

“If there is an opportunity that makes sense, then why not?” he added. “This is valid for both insurers and reinsurers.”

Helvetia’s acquisition of Nationale Suisse has created a new Swiss insurance group with a profit potential that, the company claims, could be more than SFr500 million ($559 million).

Kanis added that Helvetia’s presence in six Continental European markets has been enhanced by the acquisition and believes the insurer can grow in many of the markets by at least 10 percent. The specialty lines that Nationale Suisse has expertise in have also brought diversification to the company.

Commenting on the rise of the use of insurance-linked securities (ILS) as a risk transfer mechanism, Kanis said that as a European insurer Helvetia did not view ILS in the same way that a large US insurer might. He said that, in Europe, ILS did not have as much importance as it did in the US, for three reasons.

“First, there are higher margins in the US on the cat side. Second, the way cat business is placed in Europe is different: it consists of more perils than in the US which makes the coverage broader.

“Third, it’s probable that many investors view European models as less reliable than ones in the US because of their shorter history,” said Kanis.

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