14 September 2015 Insurance

Future M&A activity will be driven by Far East

Merger and acquisition (M&A) will continue to be a feature governing the direction of the re/insurance industry throughout 2016, when cross-border tie-ups will dominate.

So said Aon Benfield which backed up this sentiment by revealing it will open an office in Hong Kong next year dedicated to servicing the increased demand that the global broker expects will emanate from Asia.

Speaking at the launch of the Aon Benfield Annual Reinsurance Market Outlook yesterday (Sunday September 13) at Monte Carlo’s Café De Paris, Paul Schultz, president of Aon Benfield Securities, said that a movement of capital from Asia and into Europe will drive mergers in that global sector.

“Capital coming out of Asia and into Europe—that will continue for a couple of years,” he said.

M&A activity will continue to be driven by strong valuations, he said. “Management feel empowered to create transactions and a perceived need to grow, as well as a tolerance by investors to accept dilution on shareholder price, he said.

Dominic Christian, executive chairman of Aon Benfield, added: “If used for the right ends M&A offer opportunities to introduce new products into the marketplace. But you still have to prove that what you are doing is complementary as a business model.

“It’s all part of a cycle, but if they take the new permutation and turn it into something more valuable then that’s fine.”

Attendees at the meeting also heard that the race to develop a model or any kind of pricing system for cyber risk was being hampered by the reluctance of corporations to accept the part they should play in product development.

“The primary change in psychology has to come from the CEOs of companies,” said Bryon Ehrhart, CEO of Aon Benfield Americas. “They need to see the value in insurance.”

When asked how far Aon Benfield has gone in developing a cyber model, Ehrhart said: “The glue that has brought capital has been analytics, but that can only become possible when you get the ability to describe the risk correctly.”

The Aon outlook for the reinsurance sector as a whole is broadly stable with some new opportunities for growth.

Demand will increase slightly next year “due to factors including updates to rating agencies’ capital models, the continued privatisation of re/insurable risks from government pools and the expansion of re/insurers into new lines of business”.

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk