Industry experts have warned that capital in the reinsurance market will keep commercial insurance premiums low as merger activity will continue to rise in the wake of a soft market.
Lambros Lambrou, chief executive of
Aon Risk Solutions, told
The Australian that “premium rates in all major commercial classes continued to fall in the second half of 2014 and are likely to continue that trend this year.”
“We expect strong financial results from insurers and new entrants opening in Australia this year to provide buyers with a positive negotiating environment, benefiting from more alternatives and greater contestability.”
Lambrou cited “intense competition and significant amounts of capacity among local and overseas insurers” are drivers of the soft commercial market.
Head of placement for Asia-Pacific at
Marsh,
John Donnelly stressed that “there’s likely to be some serious merger and acquisition activity,” on the back of the soft market.
With XL Group agreeing to a mammoth, $5 billion deal to acquire Catlin to become one of the major players in the international industry and following a spate of recent, local mergers, Donnelly sees the trend continuing in 2015.
“If commercial insurers are facing a drop in premium income and limited economic growth in the countries in which they operate, you can see why they’re looking at the possible benefits of mergers,” Donnelly told
The Australian.
