Insurer mergers and acquisitions expected to continue
July, 21st 2015
Merger and takeover activity is likely to continue in the property/casualty insurance market, according to a report released Monday by A.M. Best Co. Inc.
In “Insurance and Reinsurance Market Conditions Set the Scene for Further Takeover Activity,” Oldwick, New Jersey-based rating agency Best said it “expects industry consolidation to remain at the forefront of the management agenda as companies attempt to drive cost efficiencies, diversify both geographically and by product and increase market share.”
It said the current low-interest-rate environment, which hurts companies' ability to generate investment returns, “enables cheap borrowing to finance deals.”
Best also noted that “there has been a significant shift to tie-ups between large-scale companies as opposed to transactions involving smaller entities.” Such deals could change the reinsurance market landscape, “squeezing businesses that lack niche product differentiation,” Best said in its report.
Best said the broker sector is also subject to M&A activity.
“Increasingly, the major brokers are seeking to exploit collected data and analytical tools to realize efficiencies and to supplement commission payments,” said Best's report.
Best cited the proposed merger between Willis Group Holdings P.L.C. and Towers Watson & Co. as an “example of brokers developing their analytical operations to offer added value and illustrates the growing importance of data mining and analysis.”