Industry divided over M&A impact: Xuber

28-05-2015

The reinsurance industry is divided over the actual impact of the current wave of mergers and acquisitions (M&A) in the market. 

This is according to a global reinsurance survey undertaken by Xuber, Xchanging’s insurance software business.

When asked to predict how many reinsurers will be writing $500 million or more in gross written premiums in 2017, opinions were mixed with 40 percent thinking there would be between 40 and 50, followed by 20-30 (23 percent), 30-40 (20 percent), more than 50 (15 percent) and 10-20 (2 percent).

According to rating agency AM Best, in 2014 there were 50 international reinsurance companies which wrote more than $500 million of gross reinsurance premiums.

The survey also found that that cultural integration is the top challenge facing reinsurers as a result of the M&A in the industry, with 95 percent of respondents viewing this as the major challenge. 

This was followed by the integration of multiple systems (83 percent) and distraction from business as usual (80 percent).

Chris Baker, executive director at Xuber, said: “Bigger does not always mean better, and the mismanagement of the cultural integration between merged companies can ultimately undermine the potential value created. 

“Fusing diverse company cultures and qualities can deliver immense value as both companies bring something unique and different to the table. Mergers and acquisitions create anxiety amongst employees, and both companies are keen not to lose a culture that works for them and is meaningful.

M&A will inevitably lead to fewer reinsurers, but an overwhelming 80 percent of those surveyed did not believe this would lead to less competition, while only 18 percent did believe the market would be less competitive.”

Xuber, Xchanging, Mergers & Acquisitions, Bermuda, AM Best

Bermuda Re