A.M. Best expects more reinsurance deals
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Merger and acquisition activity in the global reinsurance sector is likely to continue as competitive pressure persists and the industry remains overcapitalized, A.M. Best & Co. said in a report released Friday.
“The global reinsurance sector remains by all accounts overcapitalized. Additionally, market conditions are expected to remain competitive and challenging,” rating agency Best said in its report, “Global Reinsurers: M&A — A Strategy or Ultimatum.”
While noting that “size alone is not a substitute for an organization's overall discipline,” the report said that “recently announced deals seem to reflect the need for attaining greater global scale and diversified product lines and distribution.”
Breadth of offerings also is a rising bar for reinsurers. “Cedents want companies that have a wide product offering and a strong market presence, essentially replacing the days of specialty focused reinsurance companies,” according to the report.
“Monoline companies or companies that are focused solely on reinsurance or predominately property catastrophe solutions will likely be a thing of the past and are probably under the greatest pressure,” the report said.
In such an environment, it may be advantageous for reinsurers to be proactive in seeking potential partners.
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