- Lloyd's announces key appointments for the governance and delivery of the Future at Lloyd’s Blueprint One programme together with confirmation of the raising of £300m of senior debt to fund the transformation
- Insurance Europe new publication-"Why Insurance" urges policymakers to make sure the industry’s special features are taken into account when developing insurance regulation
- Geneva Association Women in Insurance Award launched
- CII PublicTrust survey indicates UK consumers want action on renewal pricing
- Willis Towers Watson launches ResQ Financial Reporter, an out-of-the-box software solution designed to help P&C insurers implement IFRS 17
- Duck Creek announces that four leading investment firms have invested $120m in the company
- FRISS to partner with National Insurance Crime Bureau(NICB) expired
- City Insurance shows impressive growth expired
- Canopius appointsTongue as underwriter, trade & political risk expired
- Hannover Re and Global Parametrics in partnership with BMZ and KfW to form Natural Disaster Fund(NDF) Deutschland expired
- Victor Insurance Holdings announces approval from Lloyd’s to establish Victor Syndicate 2288 and commence underwriting effective 1st January expired
- BMS announces appointments to its US reinsurance team expired
14th August 2019
S&P Global Ratings reviews reinsurance markets
The global reinsurance sector continues to face challenging business conditions, although the sector managed to benefit from modest rate increases in 2018 and in the first half of 2019, after record back-to-back catastrophe losses in 2017 and 2018. However, as noted in a report published yesterday on S&P GLobal RatingsDirect, pressure on the sector's earnings continues, with plentiful traditional and alternative capacity, changing cedants' demand, and the commoditisation of property risks. Thus, reinsurers want to strengthen their relevance and improve the resilience of their business and financial positions. To achieve this, the industry has employed various strategies, including highly tailored reinsurance solutions, pairing up with alternative capital providers, enhancing digital capabilities, and exploring opportunities to close the protection gap.
Reinsurers' merger and acquisition (M&A) activity is still a hot topic, particularly because some players are posting sub-par shareholder returns due to cost inefficiency, margin pressure, and still-excess capacity. Through the first half of 2019, the deal value of M&A activity in the insurance world totalled more than $20bn. Whilst this is below the average of recent years(compared to same periods in prior years, the rating agency thinks this represents a temporary lull rather than the end of the M&A dance.
Continued challenging business conditions, coupled with cheap financing in the debt market, will continue to fuel M&A activity for the next few years. In particular, those competitors with a more narrow business profile or limited geographic footprint will likely either consider M&A or become targets themselves. Further, the ongoing convergence of the insurance, reinsurance, and insurance-linked securities(ILS) markets through M&A will continue.
S&P Global Ratings do not expect consolidation among the top 10 reinsurers as they already account for about 70% of the total net reinsurance premium(about $210bn) emanating from the top 25 reinsurers. Furthermore, many of them have a material amount of direct insurance business. A merger among these reinsurers would bring not only significant execution risk, but also counterparty concentration risk for the cedants, and thereby could lead to a substantial overlap and the resulting loss of business for the consolidated group.
S&P Global Trends(503 articles)