Two-thirds of insurance executives and analysts believe that therecent mergers of St. Paul/Travelers and John Hancock/Manulifeindicate heightened industry consolidation activity, according to asurvey presented at Standard & Poor's recent insuranceconference.

Debt and equity markets reward the stock insurance companies fortheir ability to acquire other companies, believe 71 percent of theindustry executives surveyed. “It is clear that the financialflexibility enjoyed by stock companies to purchase another companyfar outweighs the vulnerability to be acquired,” said StevenDreyer, managing director of Standard & Poor's insuranceratings.

Mutual companies should be subject to a mirror Sarbanes-OxleyAct, like that being considered by the NAICC, said 59 percent ofthe respondents. “These executives apparently are skeptical aboutthe management of smaller insurance companies with respect to theirgovernance and transparency issues,” Dreyer noted.

In a discussion on the topic, Edmund Kelly, CEO of LibertyMutual, compared the insurance and pizza industries. “Inevitably,large entities with large brands will dominate,” he said. The moreinformation people have, the fewer decisions they want to make, heexplained, which is why they will order pizza from Pizza Hut andinsurance from a name-brand carrier.

“There always is a drive to grow,” said Evan Greenberg, CEO ofACE, Ltd., who predicts more merger and acquisition on the horizon,with a mixed bag of motivations and targets. “There typically is,and will always be, a certain amount of merger activity that isdriven by a logic that is backed into to justify acquisitions.”This is true even in cases involving mergers that really arepursued for growth purposes, he added.

When asked which presidential candidate would be more positivefor the insurance industry, respondents chose George W. Bush 78percent to 22 percent over John Kerry. Increasing price competitionis the issue that 33 percent cited as the one that most concernsthem.

Other issues of concern were excessive jury awards (20 percent),rapidly rising interest rates (18 percent), increasing regulatoryrisks (18 percent), and terrorism (11 percent).