M&A action–who is next down the aisle?

The uptick in M&A was predicted by experts. Deloitte said at the beginning of the year: “Now that the insurance sector has come through the financial crisis and many companies are on better financial footing, C-suites and boards of directors are placing renewed attention on the quest for profitable growth. While growing organically is proving difficult, the strategy to deploy available capital to M&A continues to accelerate…We believe that 2015 will see continuing acceleration of activity in the insurance M&A market.”

Until recently, the focus has been on the reinsurance market with a slew of deals at the end of 2014 and into 2015, including Renaissance Re’s acquisition of Platinum Underwriters Holdings, Endurance Specialty’s proposed acquisition of Montpelier Re, and Partner Re and Axis Capital’s proposed merger. (Note: at the time of going to press, it was unclear whether the Italian conglomerate Exor would scupper Partner Re’s preferred tie-up with Axis.)

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As for insurers, we’ve had some pretty huge announcements including XL Capital’s acquisition of Catlin Group, Tokio Marine’s takeover of HCC, and now ACE buying Chubb (strangely, leaving a new group called Chubb).

And on the broking side, there has been lots of re-positioning, with Arthur Gallagher buying up lots of smaller brokers over the last couple of years, and then Willis surprising everyone with acquisitions of Towers Watson, Gras Savoye and Miller.

Whether multinational insurance buyers will be pleased by the moves remains to be seen. Some might argue that larger and stronger insurers and brokers is a good thing, while others may see it as further moves to reduce choice. More importantly, the transactions will probably lead to further consolidation as remaining competitors respond with moves of their own. Only Generali has said recently that it won’t be looking for acquisitions.

But the pressure will be on JLT, Aon and Marsh, to respond to Willis’ recent acquisitions. Similarly, it will be interesting to see the response of the other global insurers to the ACE/Chubb tie-up. Will they be eying up the likes of Mapfre, Generali, RSA and Travelers?

Until the ACE/Chubb deal, the answer would probably have been no, but in this new dynamic market environment, who knows?