Interest from Asia could drive M&As

Jim Bradshaw/ MICHAEL MARCOTTE

DALLAS – Merger activity in the insurance and reinsurance sector has been quiet this year compared with the blockbuster mergers announced in 2015 of XL Group P.L.C. and Catlin Group Ltd. and Ace Ltd.’s merger with Chubb Corp., but activity is picking up.

Most recently, Japanese insurer Sompo Holdings Inc. last month announced that it was buying Bermudabased Endurance Specialty Holdings Ltd. for $6.3 billion.

Several executives meeting at the Property Casualty Insurers Association of America conference in Dallas last month said they expect to see more interest from Asia in U.S. insurers and reinsurers.

While 2016 had been relatively quiet on the M&A front, “it’s starting to pick up now,” said Jim Bradshaw, CEO of Willis Re North America in New York.

“The Asian markets have a lower cost of capital and a longer term for investment horizon,” he said, “so we expect the Asian market to be very active in the U.S.”

Chinese insurers find the U.S. attractive because it is a heavily regulated, Mr. Bradshaw said.

“It’s kind of a safe place for them to put their money, and I think they take a long-term perspective in terms of the return on their investment. Combine all those factors together, it makes it very conducive to M&A,” he said.

However, the number of transactions that have occurred over the past four or five years has limited the pool of attractive acquisition targets, said Keith Wolfe, president of U.S. property/casualty-regional and national at Swiss Reinsurance America Corp. in Armonk, New York.