Convergence: Hard market muting M&A activity

Merger and acquisition activity in the property casualty sector is likely to remain muted while the hard market continues, according to industry experts.  

Potential buyers don’t want the distraction of a takeover and have other opportunities to make money, said Kyle LaBarre, co-director of property and casualty research and partner at Dowling & Partners. 

At the same time, weaker rivals who could be seen as takeover targets were likely to resist takeover bids while they had a chance to grow in a hard market. 

“The prime time for M&A is when growth starts to slow down and you have to think about rationalisation of expenses,” he said. 

LaBarre noted the market had not been entirely quiescent, with RenaissanceRe buying Validus from AIG last year and legacy insurer Enstar announcing it was being bought by Sixth Street. 

But he said this was a far cry from the era when 17 Bermuda re/insurers were “reduced to about four”. 

Raoul Lobo, vice president of Stone Point, said there were not many companies available for sale which would “move the needle” in the way that the Validus buyout or the earlier purchase of PartnerRe by Covea did. 

Aditya Dutt, president of Aeolus Capital Management, said the industry was already well consolidated, with five reinsurers having combined capital of $100 billion. 

It is hard to become a Swiss Re without buying something pretty large,” he said. 

“It feels like this is build time, not buy time,” said David King, founder and senior managing director of Culpeper Capital Partners. 

LaBarre added that he thought there was more likelihood there would be consolidation in the excess and surplus segment. 

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