28 November 2014News

RenRe deal could spark M&A activity

RenaissanceRe's agreement to acquire Platinum Underwriters could spur merger and acquisition (M&A) activity among reinsurers.

This is according to rating agency Fitch Ratings which added that reinsurance M&A has been limited recently due to a lack of willing sellers and inherent uncertainty tied to large acquisitions.

"But Platinum's limited market position in an increasingly competitive market influenced management's decision to seek a buyer," said the rating agency. "This proposed transaction is not a blockbuster deal because Platinum is a small reinsurer and has been shrinking its business considerably in recent years, but it may provoke a shift in market attitude to embrace more consolidation as a strategic option to combat the stress in the reinsurance market."

Fitch added that record capitalisation among traditional reinsurers and the growing capacity provided by alternative capital providers are softening reinsurance pricing and broadening policy terms and conditions, with no catalyst for a reversal in sight.

"The RenRe-Platinum deal is a combination of reinsurers, but many reinsurers are focused on diversification into primary markets, which could promote a broader variety of acquisitions," it added.