Consolidation in the global life insurance market is likely to accelerate in the next few years due to an increase in capital available to insurers, according to insurer Swiss Re.
In Swiss Re’s new Sigma study, a thriving equity market combined with cost cutting has strengthened the balance sheets of life insurers. These factors point toward a sharp increase in mergers and acquisitions in the future, according to the insurer.
Thomas Hess, Swiss Re’s chief economist, comments: Life insurers have strengthened their balance sheets and boosted their capital. This will spur consolidation in life insurance. However, M&A activity is unlikely to return in the near future to the levels seen in the late 1990s.
Consolidation enables large companies to better spread their costs, tap more resources for product innovation and optimize capital costs, for example by transferring blocks of business to the capital market.
Speculation that consolidation would take off this year pushed up stocks in British insurers this week as Prudential saw its stock rise to the highest in three and a half years.