M&A likely to continue but on a smaller scale

M&A likely to continue but on a smaller scale | Insurance Business

M&A likely to continue but on a smaller scale
John Andre, group vice-president at US-based ratings agency A.M. Best, has predicted that mergers and acquisitions (M&A) in the reinsurance industry will continue, but would likely be on a smaller scale than the past few years, resulting to a fall in jobs, according to The Royal Gazette report.

In a one-day conference in Bermuda, Andre said that “the big ones [insurance companies] are harder – they take so long to absorb, but we will still continue to see merger and acquisitions of the small and medium type.”

“It might not be a straightforward merger, it might be a company acquiring a team of analysts from another company and hopefully taking their business with them.”

Andre warned that even as M&As continue, albeit in a smaller scale, jobs could still go as the industry continues to evolve.

“There could be a fall in jobs as a result. They look for synergies and often that can mean a reduction of staff, absolutely.”

In said conference, Andre also discussed the challenges the reinsurance industry is facing. The first ones that come to mind, Andre said, are overabundance of capital, competition, and investment returns.

According to the Royal Gazette report, Andre has expressed that the growth of alternative capital, such as insurance-linked securities, had changed the traditional insurance and reinsurance landscape.

“The industry is maintaining underwriting discipline, managing its capital, and evolving.”

“The market levels aren’t like they used to be. Companies have to be very innovative in order to compete.”

Andre has also expressed that variations in interest rates were a crucial factor in the sector: “If we see an improvement in interest rates, that will go a long way.”

“The business will continue to evolve – it’s not what it was 20 years ago, it’s a heck of a lot different,” Andre also predicted.