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Report foresees major insurance industry changes

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NEW YORK—Regulatory reform, potential tax law changes and a new wave of industry consolidation are expected to alter the insurance industry landscape in the next five years, a consultant said in a report released Tuesday.

The report by PricewaterhouseCoopers said proposed legislation, including health insurance reform, and efforts to increase federal oversight of the industry, including establishing a Federal Insurance Office, are likely to have the biggest effect on U.S.-based insurers by 2015.

In addition, insurance companies worldwide should expect renewed scrutiny of their tax-planning methods as governments crack down on insurance companies in an effort to increase tax revenue. Tax changes are likely to include more stringent requirements for transparency in the wake of the industry trend to shift business to other lower-tax jurisdictions, the report said.

The worldwide market for mergers and acquisitions also is expected to heat up, according to the New York-based consultant. “The strong underlying rationale for consolidation and restructuring means that merger and acquisition activity may be set to accelerate rapidly, particularly as larger, better-capitalized firms consume smaller firms,” the report said.

Given the expected changes, insurers that are better prepared will be more likely to excel in the new environment, and success will depend on an insurers’ ability to “quickly capitalize on opportunities” as reforms and changes emerge, the report said.

The report, Emerging from the Storm: The Day After Tomorrow for Insurance, is available at www.pwc.com/dayaftertomorrow.