E&S lines may be a target for M&A

Excess and surplus (E&S) lines may become a target for M&A activity, according to an analysis provided by CreditSights.

CreditSights suggested that insurers specialising in these lines may be attractive takeover targets for insurers specialisng in more generic commercial and personal insurance lines

Factors that may encourage M&A activity in E&S include more favourable pricing conditions in comparison to generic property and other commercial lines.

“We would not be entirely surprised to see a larger insurer pick-off some mid-tier specialty writers,” said CreditSights.

Based off CreditSight’s data, the aggregate combined ratio for E&S lines for each of the top 20 writers of E&S business was better than the combined ratio of the overall property/casualty operation in 2015.

CreditSights suggests that these margins in E&S lines are substantially stronger than in many other lines of business.

For all but three insurers, based on the data provided by CreditSights, the E&S combined ratio was better than the overall P&C combined ratio by at least 10 percentage points.