Reinsurance market has ‘awful lot of choice for buyers:’ Aon Benfield Canada CEO

There has been “very little impact,” on brokers and cedents, from recent mergers and acquisitions in the reinsurance industry, a speaker suggested Wednesday at Insurance Bureau of Canada’s Financial Affairs Symposium.

“I think, a little surprisingly, to date there has been very little impact from the (mergers and acquisitions) and overall consolidation,” said David Sloan, president and chief executive officer of Aon Benfield Canada.

Sloan made his remarks during a panel discussion, in reply to a question from the moderator – Jonathan Turner, senior vice president and chief financial officer of Swiss Reinsurance Company Ltd.’s Canadian operations – as to what impact the industry consolidation in global reinsurance is having on cedents and brokers.

“In the last two or three years there actually has been quite a lot of activity, varying in type and scale, but I think the real impact has been minimal,” Sloan told attendees Wednesday.

The annual event was held this year at the Design Exchange – the original location of the Toronto Stock Exchange – in the city’s financial district.

“Traditional capital and alternative capital are at all time record highs, so some level of consolidation has very little impact on that,” Sloan said during the panel discussion, titled P&C Insurance Perspectives on Reinsurance.

“Despite that consolidation over the last two or three years, as of today we are still at more or less an all-time high,” Sloan added. “The diversity in that capital is also fairly significant. The market remains fairly fragmented, there is lots of new different forms of capital…. so it still provides an awful lot of choice for buyers, so it really hasn’t changed that dynamic.”

Sloan cited specific examples of mergers between reinsurance and insurance carriers, including XL Group PLC’s US$4.1-billion merger, completed in 2015, of Catlin Group Ltd.

“If you look at it from a Canadian perspective, there was a mix of insurance and reinsurance,” Sloan said of the Catlin acquisition. “It created a much bigger group. Their product offering to the world became much broader, which they would see as a good thing.”

Sloan also discussed a proposed merger – between PartnerRe Ltd. and Axis Capital Holdings Ltd. – which was terminated in 2015.

“If you look at the deal that didn’t get done, the Axis-PartnerRe deal as an example, that really seemed to be more about balancing and diversification of portfolios,” Sloan said.

Axis and PartnerRe announced their proposal to merge in January, 2015. Three months later, EXOR S.p.A. announced a separate offer to acquire PartnerRe. Turin, Italy-based EXOR – which holds a significant minority of Fiat-Chrysler Automobile – has since closed its acquisition of PartnerRe.

“Axis was primarily an insurance company with reinsurance business,” Sloan said at the financial affairs symposium. “PartnerRe was almost exclusively a reinsurance play. So you put those two things together, you get a much bigger group, which has better balance, better spread of business. It wasn’t necessarily to remove capital from the business.”

Also speaking on the panel were Claudette Cantin – senior vice president, chief actuary and chief risk officer for Munich Re Canada – and Philip Mather, senior vice president and chief financial officer for Economical Insurance.

Panelists were asked whether any risks are under-reinsured.

“2013 showed that Canada’s got a long way to go in terms of flood,” said Mather, alluding to floods in southern Alberta in June of that year and the July 8 rainstorm in the Toronto area. “We have seen a response to that from the primary marketplace but I guess the question is still open as to the 5% who are really significantly exposed. Are there solutions in place for those individuals and what will it take to put a solution in place? I don’t think that’s just an insurance industry response. There is a governmental response as well and Canada is not alone in that. There are lots of well-developed countries out there that are still trying to tackle and work through to an appropriate solution.”

IBC CEO Don Forgeron @ibc_ceo kicks off our 20th annual Financial Affairs Symposium. @insurancebureau #fas2016 pic.twitter.com/jIPsUa02Xk

— Steve Kee (@steve_kee) April 13, 2016