Small reinsurers will survive

Much is made of the tendency of large players to gobble up their smaller rivals, and each other, evoking visions of a future where a small number of huge players dominate the market.

But this vision is probably inaccurate, according to more than half the respondents to the most recent Intelligent Insurer renewals survey.

In all, 56 percent of respondents said consolidation will not make a significant difference to the role small players play in the market.

That comprised 37 percent of respondents to the survey who said smaller players will be acquired, only to be replaced by new players that emerge to fill niche areas. This is already happening, noted one respondent, who pointed to “a wealth of smaller reinsurers emerging across the globe”.

“The consolidation trend leaves larger companies less nimble and less responsive to smaller books, opening the door for selective capital deployment into niche sectors,” added another, explaining one possible driver behind the trend.

“Size matters,” quipped another respondent, “but also technical skill and competence,” highlighting another reason why smaller players might be able to find a competitive advantage, especially in niche areas.

A further 19 percent said industry consolidation will make little difference in the long term. One reason for this might be the desire among insurance companies to maintain some diversity in their reinsurance relationships.

“Buyers will continue to rationalise their reinsurer panels while wishing to maintain diversity,” noted one respondent.

The remaining respondents agree that consolidation is driving structural changes in the reinsurance market, with 28 percent of the survey respondents predicting an increasingly tiered market in which the biggest players dominate and progressively smaller companies compete for scraps.

Only 16 percent subscribed to the vision of a highly concentrated market in which a smaller number of much larger reinsurers compete among themselves.