September 21st, 2015

Disruptive Forces to M&A Activity: Alternative Capital Directly Supporting Increased Market Competition

Posted at 1:00 AM ET

The flow of alternative capital into the reinsurance markets has been sustained and substantial. The growth of this capital, coming from a number of sources, including fund managers and sidecars, has been a staggering 22 percent - compounding since 2008 and accelerating to 34 percent during the period 2012 to 2014. There was a consequent rate softening, mostly felt within the reinsurance landscape, particularly in short tail lines. The softening then trickled down into the specialty insurance classes.

This inflow of capital drove declines in pricing, challenged (re)insurers and impacted the wave of merger & acquisition deals. It is likely that the increased fluidity of capital simply accelerated the development of the challenging market and the onset of consolidation activity.

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