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Fitch sees no broad rate relief from M&A activity

Posted On: Sep. 14, 2015 12:00 AM CST

MONTE CARLO, Monaco — The current spate of mergers and acquisitions in the industry likely will not be enough to halt continued rate declines in many lines of business, according to Fitch Ratings Ltd.

While many of the recent M&A deals do make sense from the point of view of giving the enlarged group a more diversified book of business, for example, in some cases it remains to be seen whether all of the combinations can deliver value for shareholders and cedents, said Martyn Street, a senior director at Fitch Ratings in London, speaking at a briefing at the Rendez-Vous de Septembre reinsurance gathering in Monte Carlo, Monaco, Sunday.

The competitive nature of the reinsurance market, with an abundance of capacity, creates challenging conditions for mid-size and small reinsurers in particular, said Brian Schneider, a senior director at Fitch in Chicago.

M&A, therefore, likely will continue as size and scale become more important for reinsurers, he said.

Rates for many lines of business will continue to fall at the Jan. 1 renewal, said Mr. Street.

“For us, there is no convincing sign that a floor has been reached,” he said.

He said, however, that there is still discipline among reinsurers.