mergers & acquisitions

As reinsurance firms continue to shape their responses to the challenging and competitive market environment, searching for profitable business remains a key necessity and the desire for this relevance could drive more mergers & acquisitions, says A.M. Best.

After a busy 2015 for M&A activity in the insurance and reinsurance industry, 2016 is expected to follow suit. However, a new Standard & Poor’s (S&P) report shows that re/insurance sector M&A is more often than not negative for those involved, with synergies rarely achieved.

John Elkann, Chairman and CEO of diversified Italian investment holding company EXOR S.p.A has been appointed Chairman of EXOR’s newly acquired reinsurance operation PartnerRe’s Board of Directors. Also Emmanuel Clarke, President of PartnerRe Ltd., has been named President and CEO.

Analysts at Morgan Stanley have predicted further, albeit slower, reinsurance rate declines at mid-year as market headwinds persist. However, the firm does highlight an opportunity for insurers and reinsurers created by the flurry of merger and acquisition (M&A) activity witnessed in 2015.

Pressure on insurance and reinsurance companies to enter into mergers or acquisitions (M&A) is expected to continue, as pressure on earnings remains. However the consolidation trend in 2016 is expected to be slower than seen last year, according to Fitch Ratings.

A persistent flow of insurance and reinsurance industry merger and acquisition (M&A) activity trended throughout 2015, with “significantly” more deals expected over the coming months. This consolidation has the potential to stabilize rates, but diminish demand in 2016, according to KBW.

One of the final hurdles has been overcome and PartnerRe looks set to become the reinsurance arm of Italian investment holding company EXOR S.p.A after the reinsurers shareholders approved the acquisition at a meeting in Bermuda today.

With ongoing market pressures continuing to reshape the need for global reinsurance industry firms to remain relevant is key, with those who fail to do so at risk of disappearing from the reinsurance landscape, according to Liberty Mutual’s James Slaughter.

The third-party reinsurance capital and ILS fund management operations of Blue Capital are a “nice benefit” of the acquisition of Montpelier Re for insurance and reinsurance group Endurance, according to Mike McGuire, CFO.

The continued imbalance between supply and demand for reinsurance capital will lead pricing down by up to -5% in 2016, according to Standard & Poor’s and the rating agency does not expect the imbalance to level out over the next year.