Hostile takeover bids have not been common in the reinsurance industry, and observers differ about whether that may change in the wake of Endurance Specialty Holdings Ltd.'s failed bid for Aspen Insurance Holdings Ltd.

Excess capital and generally soft prices have set the stage for mergers and acquisitions, but hostile bids' pitfalls range from overpaying for a target to creating a poisonous atmosphere among new employees, observers say.

“The insurance industry is not a fan of hostile takeovers,” said Joseph Scheerer, principal and managing director at strategic adviser Stonybrook Capital in New York. “The reinsurance business, specifically, is a little clubby.”

“It's a very rare type of event, especially for a company that's not in play,” said Brian Schneider, senior director of insurance at Fitch Ratings Inc. in Chicago. He contrasted the Endurance/Aspen standoff with the bidding war that erupted for Transatlantic Holdings Inc. when it sought to be acquired, a war Alleghany Corp. ultimately won in 2011.

“Those are really hard deals to do,” John Wicher, principal of John Wicher & Associates in San Francisco, said of unfriendly offers. “When somebody boards your ship and throws the captain overboard, it's not going to be a comfortable environment.”

A hostile bid might work in very limited circumstances, he said, such as if the acquiring company were willing to lose the target's top management while making its offer attractive enough to keep the niche business' underwriters and staff.

A hostile offer, particularly if it sparks a bidding war, also raises the risk of overpaying for a target company, said James Eck, a senior credit officer at Moody's Investors Service Inc. in New York. “It's hard to envision, given the challenges the sector faces,” he said, adding that an acquirer might be better off hiring competitors' underwriting teams and working to expand the business organically.

But some see more hostile takeover bids in the future as excess capacity and convergence capital make it harder for reinsurers to grow organically.

If acquisitions are the only way to grow, “we'll see more and more hostile takeovers,” said Steven K. Bolland, managing director of Marsh, Berry & Co. Inc. “It's bound to happen,” he said. “Not everyone is going to go quietly.”