NU Online News Service, Sept. 21, 3:37 p.m. EST
Insurance chief financial officers say current market conditions will result in increased mergers and acquisitions, according to data from a Towers Watson survey.
"CFOs are anticipating winners and losers as a result of the soft market we've been through, and are predicting that those companies that do not emerge in a strong financial situation could be targets of an acquisition," says Bruce Fell, a managing director of risk consulting and software business for Towers Watson, in a statement. "This could change the landscape of the market as the stronger companies increase market share."
The inaugural survey of property and casualty CFOs also suggests hardening markets are on the way for the standard property and casualty markets.
Close to two-thirds of surveyed CFOs says property market prices are at the bottom of the cycle and turning upward.
The casualty market remains soft, say 87 percent of CFOs, but 80 percent of these CFOs say the casualty market is within two years of hardening.
The CFOs say outcomes of the current property market will be changing rate levels, improving financial performance and additional M&A activity.
Outcomes of the casualty market include deterioration in financial performance and increase levels of M&A.
"Clearly, there are differences between the property and casualty markets, yet it does seem we are approaching a turn in the overall marketplace," adds Fell. "[Property and casualty] insurers continue to face an uncertain economic climate, low investment yields, the impact of major catastrophes and expected increases in loss ratios."
Interestingly, a vast majority of CFOs say reserve redundancies continue to exist and half say redundancies will not be exhausted for over a year. Capital will not begin to erode for over a year, add survey participants.
The survey included 40 CFOs, largely from commercial, and personal and commercial, lines. Half of the respondents work for companies with a stock structure, and 40% work for mutual companies, says Towers Watson, a global professional services company.
A recent Towers Watson survey on commercial lines insurance says prices increased by almost 1.5 percent in the 2011 second quarter after the first quarter remained flat, indicating that the market may be hardening.
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