Consolidation on the cards for Bermuda

Bermudian re/insurers will need to look at the potential of consolidation following XL Group’s $4.1 billion takeover of Catlin.

This is according to Meyer Shields, managing director at Keefe, Bruyette & Woods (KBW), who explained that the industry will face a trend of defensive consolidation following the takeover.

Shields expects plentiful merger and acquisition activity to take place on Bermuda, with a number of Bermudian re/insurers becoming buyers.

“From the buyers perspective we’re most likely to see acquisitions stemming from Bermuda. A very real concern is that these companies were formed largely in the aftermath of the World Trade Centre disaster and the hurricanes of 2004/05 and very much emphasise property catastrophe. The future for this line of business looks a lot less robust,” he said.

“Many companies are very well capitalised but are not seeing the same opportunities in property cat so are looking for other things to do. Part of this is diversifying their presumably less profitable property book and some of it is finding somewhere to use all this capital.”

Shields added that although there will be intra-Bermuda consolidation, the sale of re/insurance companies will become a global phenomenon.

“Virtually every company based in Bermuda will have to look at consolidation from the perspective of either a buyer or a seller going forward. That doesn’t mean that all of them will engage in transactions but every company will have to re-evaluate their options from this perspective.”