Playing Defense: Beyond M&A

October 15, 2015

Some reinsurers “bought themselves breathing space” with merger and acquisition activities, Standard & Poor’s said in a September 2015 report titled “Defensive Plays Help Global Reinsurers to Maintain Resilience as Prices Continue to Soften.”

But those aren’t the only defensive moves that are insulating them from continued competitive pressures for now.

Some are reallocating business mixes to reduce capital needs.

The S&P report explains that prices in excess-of-loss business, particularly catastrophe, have declined more sharply than those for proportional reinsurance or primary insurance business over the past two years. Many reinsurers have responded by increasing the amount of primary and proportional lines they write.

Not only does that mean more resilient pricing, but these lines are also typically less capital-intensive, S&P said.

Providing some figures, S&P reported that 61 percent of reinsurers’ net premium written was proportional or primary business in 2014, on average, up from 54 percent in 2013. In addition, seven reinsurers tracked in the S&P report reduced the amount of reinsurance they wrote in 2014, while nine saw primary insurance business growth outpace reinsurance growth, according to data from Aon, S&P said.

Individually, reinsurer defenses include the following moves.