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Member, Beacon International Group, Ltd.
LONDON—A wave of mergers and acquisitions is unlikely at Lloyd’s of London because most interested parties likely already have a presence in the market, according to analysis released Tuesday.
Christopher Hitchings, an analyst at investment banker Keefe, Bruyette & Woods Inc. in London, said the “restrictive” stance of Lloyd’s performance management directorate concerning establishing new syndicates means that buying an existing Lloyd’s business is the most realistic way of entering the market, but he also said most companies that want a presence at Lloyd’s likely already have one.
This means Achilles Netherlands Holdings B.V.’s proposed purchase of Brit Insurance Holdings B.V. looks to be a “one-off” deal, according to the analysis, which covers several listed Lloyd’s companies that KBW follows.
According to the research, 2011 capacity at Lloyd’s likely will be about £23 billion ($36.5 billion), roughly the same as last year.
Looking at January reinsurance renewals, indicators suggest that property rates fell 5% to 10% on average and casualty rates declined up to 5%, with pricing more competitive in North America than Europe, according to the analysis.
Pricing for marine energy business increased about 25% on average, while rate increases are expected on catastrophe business for loss-affected areas such as New Zealand and Australia.
While the April 2010 Deepwater Horizon oil rig disaster was not a major loss for Lloyd’s, since BP P.L.C. was mostly self-insured, it has “prompted considerable reappraisal of the coverage which explorers need (and may be required) to purchase,” according to the report.
During this year’s first quarter, renewals likely will bring greater clarity about demand, terms and pricing of such coverage, KBW added.
KBW said it expects 2010 profits for listed Lloyd’s insurers to decline about 13% because of reduced investment income, lower rates, several catastrophes losses and a reported rise in attritional losses, among other factors.
The report is available to subscribers at www.kbw.com.