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Management shakeups, mergers create opportunity

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Insurance industry consolidation and turmoil in the executive ranks of some insurers could result in an even softer directors and officers liability insurance market as displaced underwriters find new capital to back them, say observers.

Ace Ltd.'s merger with Chubb Corp. and changes at American International Group Inc. and Zurich Insurance Group Ltd. could ultimately lead to more competition in the sector, they say.

AIG, a major D&O insurer, announced plans to cut its executive ranks by more than 20% and Zurich saw several senior executives leave last year.

Whenever there is displacement in the industry, individuals will go to another facility, “and the barriers to entry are just so low, basically all you need is someone to back you with capital,” said Brian Wanat, New York-based CEO of the U.S. financial services group at Aon Risk Solutions.

The changes in the industry put more talented people into the market “and those talented people are landing in places that allow them to

create new capacity,” said Rob Yellen, New York-based executive vice president of FINEX North America, a unit of Willis Group Holdings P.L.C.

In addition, particularly with the Ace-Chubb merger, “you may have customers who think they have too much limits with one company, so they may spread the risk around,” although it is too early at this point to clearly tell “how that shakes out,” said James Auden, managing director of insurance at Fitch Ratings Inc. in Chicago.