Reinsurers consider M&A as surplus capital deployment tool

As dedicated reinsurance capital achieves new heights at 2026’s H1, reinsurers are increasingly keeping an open mind around merger and acquisition (M&A) opportunities as a method of redeploying “capital surplus”.

In particular, this means homing in on businesses with a Lloyd’s presence or specialty lines focus, such as credit insurance.

According to Gallagher Re’s Reinsurance Market Report: Results for Half-Year 2026 report, published on 1 September 2026, dedicated reinsurance capital reached “a new all-time high” in the first six months of 2026.

This amounted to nearly $688bn, with non-life alternative capital also growing to approximately $147bn over the same reporting period.

The reinsurance broker further noted that return on equity across the reinsurance composite included in its report reached 19.9% for 2026’s first half.

Ahead of the Rendez-Vous de Septembre conference kicking off in Monte Carlo this weekend (5 September 2026), market commentators are in agreement – since 2023, reinsurance capital has been growing strongly year-on-year, leaving the sector incredibly well capitalised.

For example, Sachin Bhojani, associate director at S&P Global Ratings, commented that in natural catastrophe reinsurance specifically, reinsurers had “meaningful room” on their budget sheets to absorb any H2 natural catastrophe losses that could come down the road, with the credit agency’s stress testing going as high as $300bn in aggregate.

He even pointed to a $73bn buffer between a severe stress scenario and potential capital depletion for this class of business.

As a result of strong baseline capitalisation, reinsurance thought leaders are predicting that M&A could become an attractive capital redeployment tool for reinsurers, following in the footsteps of Zurich’s confirmed purchase of Beazley – expected to complete in the second half of this year – and Sompo International Holdings’ February 2026 acquisition of Aspen Insurance Holdings.

Charles-Marie Delpuech, insurance analyst at S&P Global Ratings, told trade press at an in-person briefing event in London on 2 September 2026: “Capital redeployment is a key topic – so, what to do with capital surplus?

“Conditions for M&A are there. We have seen examples like the Beazley deal with Zurich and Sompo buying Aspen. Also, some examples of bolt-on [acquisitions]. So, there is a bit of a space for M&A.”

Laurent Rousseau, global capital and advisory chief executive at the newly rebranded reinsurance broker Marsh Re, previously Guy Carpenter, agreed with Delpuech.

He said: “Given this supply of capital and given the growing risk opportunities, how do reinsurers stay relevant? Many now face a genuine capital allocation decision – deploy this capital to grow organically, deploy it inorganically, or return it to shareholders.

“Deployment can take two forms – the one of organic growth through greater risk coverage and addressing the formidable challenges of our time, such as artificial intelligence (AI) and global instability, and the other one is inorganic growth.

“We have already seen increased mergers and acquisitions in the specialty insurance industry. We should expect that to continue, if not accelerate.”

Delpuech added that alongside specialty insurance, other businesses that might come into reinsurers’ M&A crosshairs include MGAs and insurtechs – these have the ability of broadening reinsurers’ propositions and capabilities in soft market conditions.

Robert Greensted, director at S&P Global confirmed: “You’ve seen a lot of players get interested in lines that are uncorrelated or less correlated to the insurance cycle”.

Here, he flagged credit insurance as a particular opportunity, as well as firms that have a strong footprint or presence in Lloyd’s and the London market.

Greensted continued: “Lloyd’s still seems to remain a very attractive place to do business. We’ve seen a lot of deals going across that have a Lloyd’s presence, so we would expect that to remain the same. But otherwise, I think [M&A activity is] probably more likely to be bolt-on acquisitions.”

Word of warning

Despite the market-wide buzz around how best to use abundant reinsurance capital, Greensted observed that there is still “hesitancy” around jumping into M&A with both feet due to soft market conditions – where the supply of capacity exceeds current demand, driving a buyers’ market.

He explained: “M&A is a really interesting one because you’re obviously in a position where the reinsurers and the London market are all making quite good returns at the moment, but they’re also very aware of putting capital to use in a market which is softening. So, there’s some hesitancy to say ‘we’ll take that capital and redeploy it’.

“We’ve seen quite a few reinsurers really utilise buybacks or special dividends to return some of that capital to try and maintain discipline in the market. But obviously M&A is another opportunity to utilise some of the excess capital that we’ve been talking about.

“But the issue is that everyone seems to have the same idea and potentially the pricing that we’ve seen out there means it doesn’t seem that attractive in terms of targets.”

Simon Ashworth, chief analytical officer at S&P Global Ratings, added that M&A attractiveness will most likely all come down to valuations and private equity.

“Historically, the re/insurance sector is not trading at a particularly high multiple relative to many other sectors. So, I think overall valuations will be a [good] guide,” he said.