Emphasis on capital management could make 2010 the year of mergers as speculation continues to surround Bermudian reinsurers
While there is currently no confirmation of the rumour that Bermudian reinsurers Aspen and Ariel Re are in merger talks, a deal between the two would be logical, industry sources have suggested. The rumours are currently a major talking point in Bermuda, a senior industry source confirmed, but the two companies have made no comment yet.
Rumours have been circulating about Ariel Re for some time, and other partners were mooted during the Monte Carlo Rendez-Vous last September.
It is clear that mergers make sense for many reinsurers. Rates are currently expected to be flat to soft in 2010, and this puts the emphasis squarely on capital management. The desire to use capital effectively could also lead to a further increase in M&A.
Furthermore, a number of Bermudian reinsurers are trading below book value, which makes them potentially attractive to purchasers. Savings can be made when a company is bought where expenditure synergies exist. A merger can also be a quick or cheap way to diversify or expand into new lines of business.
The year 2009 has already seen Validus buy IPC, and PartnerRe merge with Paris Re.
In recent months, several other Bermudian reinsurers have been mentioned as possible candidates for merger, including: Harbor Point, Montpelier, Max Re, Flagstone, Aspen, Ariel Re, and Platinum. Watch all these names. 2010 could be the year for reinsurance M&A.