M&A to continue as reinsurers seek wider footprint

Merger and acquisition (M&A) activity is expected to continue throughout 2015 as companies realise the need to create a more diversified and global book of business.

This is the finding of rating agency AM Best in its latest report on the reinsurance industry, explaining that companies will feel the need to become bigger as favourable reserve releases start to diminish and companies are under pressure to deliver underwriting profits.

The rating agency added that reinsurers will now find it fundamental to have a wider footprint and broader scale to compete in the current market.

“M&A deals announced over the past few months seem to address the need for greater global scale and diversified product lines and distribution,” said AM Best.

The report also noted that at the January and April renewals, renewal pricing continued to decline in the double digits and commissions continued to go up in the low-to mid-single digits.

AM Best said: “The expectation remains that reinsurance pricing overall will remain under pressure in 2015 given continued pressures from alternative capital and the lack of any price changing event over the past few years.”