Swiss Re is anticipating an acceleration in mergers & acquisitions (M&A) activity in the global re/insurance industry as companies look to expand their business beyond traditional roles, according to Reuters.
“We are at the beginning of a wave of consolidation,” Reuters quoted Frank Reichelt, Swiss Re’s Market Executive Northern, Central, Eastern Europe, as saying at a conference in Baden-Baden, Germany.
He explained that consolidation has been driven by an increasingly blurred distinction between the roles of insurers and reinsurers in the industry, exemplified by recent deals such as AXA’s acquisition of XL Group.
Insurers have begun to expand further into reinsurance business, while reinsurers have responded by underwriting more primary business to retain access to certain markets, he said.
As this distinction continues to become less apparent, Swiss Re believes that M&A activity is likely to accelerate, with further large deals between insurers and reinsurers on the horizon.
Reichelt also suggested that the reinsurance industry is currently struggling under overcapacities as new entrants like hedge funds begin to underwrite reinsurance business, Reuters reported.
“The reinsurance industry currently does not earn its cost of capital”, he said.
Reichelt’s comments at Baden-Baden follow reports that Swiss Re may have held discussions with Anbang Insurance Group as it looks at opportunities for investment in China.