Where is consolidation taking the sector, asks GC panel
The Guy Carpenter Baden-Baden 2018 Reinsurance Symposium has raised the question of where the recent wave of mergers & acquisitions (M&A) is taking the sector.
The last 12 months have been an extension of the previous few years, and we are now seeing management changes in many of the world’s largest insurance and reinsurance players, said James Nash, CEO International at Guy Carpenter.
In a speech at yesterday’s event, Back to the past: a return to global composites, Nash said the panel were exploring a return to the subject of consolidation, stimulated in part by the announcement of some recent large combinations, such as AXA-XL and AIG-Validus.
The question is whether we have seen all this before and what, if anything, will be different this time, he noted.
“Is this marketplace a return to the past, where we see insurance groups once again enter the volatile world of reinsurance, or is this a world where a new insurance paradigm emerges?” he asked.
Pina Albo, CEO of Hamilton Insurance Group, believes that we have indeed seen all this before. “But we are probably going to see it again,” Albo noted, describing the trend leading to a cycle of mergers, resulting in larger entities, followed by spinoffs and startups emerging from there.
“There are many reasons for M&A, but the reasons that sound good on paper are not always that good in practice,” Albo said. Alignment of strategy, of skillset, the ability to create great cultures and show a differentiated value proposition does not depend on size, she said.
“Focus is more important. Companies can maintain focus and deliver a valuable proposition that is palpable. These are the ones with the best chance of success.
“There is a market for very big re/insurers but also for small players that add value,” Albo added.
Steve Arora, CEO of Axis Re, underlined the importance of diversification. “We want to partner with clients that we think are going to be a good long-term equation,” Arora suggested.
Some markets have high barriers to entry and it is smarter then to do a reinsurance play, he explained. Uncertainty that can be observed in many markets translates into risk which may offer opportunities for the sector, he noted, adding: “We are bullish on the prospects of the global reinsurance market over the long term.”
Charles Goldie, CEO P&C at PartnerRe, said that M&A in the reinsurance space will eventually go where the buyers of reinsurance want it to go.
“We are seeing buyers of reinsurance looking to concentrate their relationships with a smaller number of core reinsurers that add to their business as capital and strategic partners,” Goldie suggested.
“Ultimately this points to further consolidation and a number of truly global reinsurers as well as a need for dedicated independent reinsurers that have the ability to be strategic partners on a meaningful scale,” he said.
“I don’t see global composite insurers and reinsurers being an answer to that.”
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