FT Anticipates Bermuda M&A’s in 2011
Plunging premium costs — estimated to fall anywhere between five and 10 percent — will likely lead to a wave of mergers and acquisitions in the Bermuda reinsurance market this year, the “Financial Times” has reported (Dec. 30).
The respected business journal says this will mark the second year in a row that the premium prices insurers pay to global reinsurers have declined — setting the stage for some Bermuda firms to be absorbed as venture capital backers withdraw from smaller operations.
“Industry experts calculate that it will take an event that causes losses to reinsurers in excess of $50 billion to have a significantly negative impact on the industry’s capital base and therefore reverse the falls in reinsurance pricing,” said the newspaper. ” … Reinsurers had managed to forestall a greater slide in pricing partly because changes in industry models meant higher inland losses were now expected from hurricanes in Texas and Florida.
“Reinsurers had also been writing more ‘lateral reinsurance’, covering less extreme losses, which would help primary insurers smooth earnings.”
Earlier this month international consultancy firm Keefe, Bruyette & Woods (KBW) had reported Bermuda reinsurers were “treading water” because of falling premium prices and predicted a number of M&A’s were likely in 2011.
KBW said the likliest Bermuda target companies for take-overs include Everest Reinsurance Holdings, Flagstone Reinsurance Ltd., Maiden Holdings, Montpelier Re Holdings Ltd., Platinum Underwriters Holdings, Transatlantic Holdings Inc., and XL Capital Ltd.,.
