Does Sompo’s ‘shock’ Aspen purchase signal a new wave of reinsurance M&A?

After Sompo International Holdings’ announcement on 27 August that it would buy Aspen Insurance Holdings for $3.5bn (£2.6bn), market commentators are debating whether Sompo’s “shock” news marks the start of an M&A footrace – where transactions are tools for reinsurers to achieve scale, capabilities and diversification.

Sompo’s purchase, expected to close in the first half of 2026, strives to support the (re)insurer’s plans to diversify both its property and casualty (P&C) portfolio and geographic locations, to give the insurer more clout outside of its native Japan.

According to Sompo, Aspen fulfils this goal by providing access to specialty business lines – such as cyber, credit and political risk, inland marine, UK property and construction and US management liability – reinsurance classes, a Lloyd’s syndicate and broker relationships.

The firm also has a footprint in Bermuda, the US, the UK, Canada, Singapore and Switzerland.

Sompo additionally expects Aspen to bolster its financial standing, revenue streams and capital management options – the overall business has $4.6bn (£3.4bn) of annual gross written premium (GWP), $2bn (£1.1bn) of assets under management and 80% of fee income in 2024 generated from non-catastrophe, long-tail lines of business.

Robert Greensted, director at Standard and Poor’s (S&P), explained that acquisition activity such as this in the reinsurance market has been very quiet for the past three to four years, meaning that Sompo’s announcement came as “a bit of a shock”.

He continued: “[The deal] was a bit of a shock because we hadn’t really had to deal with a lot of M&A consolidation in recent years. The market has consolidated a lot in the past, [which means] more limited opportunities going forwards.”

But is Sompo’s transaction a sign of things to come in the reinsurance sector, or a one-off deal amid a dry spell?

Size matters

For market commentators chewing the fat ahead of the Rendez-Vous de Septembre conference in Monaco over the next four days, many feel Sompo’s purchase – and any other potential market-wide acquisitions – are driven by a desire for scale.

“We think that scale is very important,” noted James Eck, vice-president and senior credit officer at Moody’s Ratings.

Describing the return of a reinsurance acquisition “after things being pretty quiet on the M&A front for a long time” as “an interesting situation”, Eck continued: “The most likely targets would be that sub $5bn (£3.7bn) of equity type companies that, for whatever reason, maybe if we’re entering an underwriting environment that’s not as attractive and [a firm does not] have that scale, [it needs] to find a larger partner to continue to earn adequate returns for shareholders, so we may see that.”

Eck’s colleague, Salman Siddiqui, associate managing director at Moody’s, added: “When we look at this underwriting cycle, we talk about market softening. One of the indicators for that is increased M&A because companies will say ‘what accounts generate organic growth or organic returns?’

“[M&A is one method] to deploy capital to increase scale and therefore get economies of scale to maintain a return.”

Although obtaining scale is one advantage of M&A, continued Siddiqui, adding new capabilities is a further plus point that reinsurers should look to tap into – he believes this is evident in Sompo’s recent purchase.

He said: “You might see more M&A around can we acquire capabilities, not just scale? Can we acquire capabilities that we don’t have – whether that’s technology, artificial intelligence (AI) or people that are doing something different – or can we acquire distribution capabilities that we don’t have?

“Sompo got access to Aspen’s Lloyd’s platform and it also got access to its insurance-linked securities (ILS) fund. Aspen generates quite a lot of fee-based income that Sompo didn’t really have and we think that also adds to the attractiveness.”

Meanwhile, Simon Ashworth, head of analytics and research – insurance at S&P Global Ratings, suggested that perhaps M&A from Japan-based firms, such as Sompo, should not come as such a surprise due to this territory’s continued “interest in expansion overseas”.

He explained: “We’ve seen lots of dynamics in [the] Japanese insurance market in terms of interest in expansion overseas and that’s coming from a variety of different places, for a variety of different reasons – not least because a lot of Japanese insurers have been forced to sell strategic equity holdings in Japanese corporates [because of] anti cartel like pricing investigations from the Japan regulator.

“They’ve got excess capital that they’re looking to deploy. We actually saw the seeds of that planted over a decade ago with Japanese insurers doing a lot of heavy research on which types of businesses to buy.”

Too much hype?

Broker Gallagher Re, however, is unconvinced that Sompo’s purchase is going to open the floodgates to more reinsurance M&A, with chief executive Tom Wakefield commenting that the firm is “a way off advising clients to worry about [a] lack of choice [in the reinsurer market], especially with the growth of the alternative capital [and the] ILS sector”.

The broker boss did concede though that due to the “excess of capital that’s in the industry” at the moment, it “would be no surprise if there was further consolidation” confirmed in the coming months.

Andrew Newman, Gallagher Re’s president, added that alongside hard and soft market cycles, there is also a cyclical nature to whether organic or inorganic growth is preferred by businesses.

However, he is “not convinced” that a period of focused acquisitional growth “is necessarily looming right now” for reinsurers.

He said: “If you look at the past, in the non-life and particularly the commercial line space, there’s a point at which organic growth creates these massive changes and results in performance. Growth is not only possible, but desirable.

“[When that] phase comes to [a] natural end and organic growth becomes challenging, what follows – but not necessarily immediately – is a period where inorganic growth becomes both possible and desirable. I’m not convinced that period is necessarily looming right now.

“If you look at the momentum the industry has in terms of underlying pricing and profitability, I wouldn’t see a rush for people to say ‘oh my gosh, there’s no possible opportunity here. Let’s try and achieve scale by buying more people’. We’re some way away from that.”

Adding ‘strength and scale’

Although Wakefield and Newman remain muted in their views as to whether M&A activity in the reinsurer market will start to gain greater traction again following in Sompo’s footsteps, Gallagher Re, meanwhile, confirmed a brand new purchase itself on 2 September 2025 – ahead of its pre-Rendez Vous de Septembre briefing in London that same day.

The company announced that it had agreed to acquire Sydney-based reinsurance broker Steadfast Re.

Addressing trade press attending its briefing session earlier this week, Wakefield said: “The deal is due to close in the fourth quarter of 2025.

“We’re really excited about this opportunity to welcome the team, which will enhance our ability to support a range of clients, including MGAs and mutuals, and will boost our local team in terms of strength and scale.

“There’s particularly strong cultural alignment with our team and I know that both parties cannot wait to get started.”