Credit rating agency A. M. Best believes that there will be more mergers and acquisitions in the reinsurance, property and casualty, and health insurance sectors.
Confronted by increasing regulatory pressures, decreasing investment returns, and new concerns such as cyber risks, even large insurers are under pressure. In a bulletin published earlier this month, A. M. Best notes that there has been a change in the kind of mergers and acquisitions taking place in the insurance industry.
"The days of a ‘white knight’ riding in to save a troubled company has given way to deals characterized as a combination of equals – where the two companies arrive with strong underwriting acumen, acknowledged brands and the ability to innovate through changing client needs in the evolving global economy," reads the report. It points to the recently announced transaction between ACE and Chubb, the formation of XL Caitlin in the spring, and the acquisition of HCC Insurance Holdings by Tokio Marine & Nichido Fire as examples of strong standalone organizations combining with other strong organizations to become even more powerful.
“A.M. Best expects to see a continuation of M&A activity with insurers focused on the underwriting fundamentals and the accumulation of insurance risk,” concludes the report. “These transactions will allow companies with strong underwriting operations to leverage that strength in their relationships with brokers, reinsurers and capital market participants.”