Capital influx into insurance market could cause more mergers: Analysis
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The continued influx of new capital into the property/casualty insurance market could drive mergers and acquisitions in the industry, according to a report released Thursday by Deloitte Services L.P.'s Deloitte Center for Financial Services.
The report, “2014 Property and Casualty Insurance Industry Outlook,” said the added capital that has flowed into the industry is “likely creating excess capacity, undermining pricing leverage and inhibiting organic premium growth.”
“This might end up rejuvenating what has turned out to be a rather tepid merger and acquisition environment” in the industry, according to the report.
The report said midsize and regional insurers might turn out to be the most active players in the M&A market, “as they look for opportunities to enlarge their footprint and take their game to the next level.”
It also said that more consolidation among agents and brokers is expected as they move to increase market share and leverage.
Another issue confronting the industry is an evolving regulatory environment, with questions arising over how state and the federal government will interact, according to the report, which noted the Federal Insurance Office's recent report on insurance regulatory modernization.
Insurers also face the question of whether the federal government's terrorism insurance backstop, slated to expire at the end of the year, will be extended, Deloitte said.
The report is available here.
