In mid-June Allied World Assurance Co. Holdings AG andTransatlantic Holdings Inc. announced a $3.2 billion merger deal, creating a globalspecialty insurer and reinsurer operating in 18 countries and onsix continents.
|In a report from Keefe, Bruyette & Woods, the consultingfirm says that the merger does not appear to be a signal ofincreased activity in the merger and acquisition arena—but the dealin itself is considered a potent combination.
|Other industry players weighed in as well on the merger'simpact.
|John Daum, executive director for Lockton Re, says that in hisview the transaction would have a minor effect on capacity. But heviews the overall deal as a good one for both parties, taking as itdoes the mature book of business of Transatlantic and melding itwith Allied.
|Adds Lara Mowery, head of global property specialty for GuyCarpenter: “In terms of pricing or available capacity for propertybusiness, we do not anticipate a material impact specifically fromthis scenario.”
|But others believe that the pressure for some insurers to pursuean M&A strategy will continue.
|“We expect the trend to continue and to see more mergers overthe next 12 to 24 months”—and that could contribute to rateincreases as capacity diminishes, says Jim Bradshaw, CEO for WillisRe Inc.
|“We expect mergers and acquisitions to continue based on thechallenge for insurers to grow organically, particularly in theregional market sector,” adds James Kent, president of Willis ReInc.
|Overall, when it comes to additional capacity, Bradshaw believesnew capacity will not come in the form of the creation of newcompanies, but the utilization of side cars, or capital raised fora specific risk, and increased M&A activity.
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