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Hard to top 2015 pace for M&A activity

Posted On: Mar. 27, 2016 12:00 AM CST

Last year's hectic pace of high-profile insurer mergers and acquisitions probably won't be repeated in 2016, but the market will likely continue to consolidate, according to market analysts.

The biggest deal of 2015 hit in early summer, when two top commercial insurers set the stage to become one. Ace Ltd.'s $28.3 billion deal to acquire Chubb Corp. created a new insurer called Chubb Ltd., which came into existence this January.

Also in 2015, XL Group P.L.C. closed its acquisition of Catlin Group Ltd.; Exor S.p.A. bought reinsurer PartnerRe Ltd. after a bidding war; and Asian insurers bought North American underwriters, with Tokio Marine Holdings Inc. agreeing to buy U.S. specialty property/casualty insurer HCC Insurance Holdings Inc. for $7.5 billion and China's Fosun International Ltd. closing a deal to acquire U.S. insurer Ironshore Inc. for $1.8 billion.

While merger and acquisition activity will probably continue this year, it won't be at the same rate as 2015, say observers.

“Last year a few things lined up well, we had an influx of activity that you might not have every year,” said James Auden, managing director of insurance at Fitch Ratings Inc. in Chicago.

“I think there's still room in the reinsurance market for M&A,” he said.

“I think it will continue, but perhaps not at the pace you saw last year,” said Paul Newsome, managing director at Sandler O'Neill & Partners L.P. in Chicago.

“You had a temporary boost that was related to interest from Japanese insurers, and that should decline,” he said. “I think the market turmoil that we've seen will probably also give folks a pause when they look at transactions.”

Mr. Auden said that a deal like the creation of Chubb Ltd. is a “rarity.”

“A lot of stars need to be aligned for a deal like that to be executed,” he said. He said that the creation of the new Chubb Ltd. involves a major integration effort that will take a long time to complete.