The insurance industry is like a giant chess board. One player makes a move and acquires a rival’s pawn – a move later undone when the rival merges with a second opponent.
As the insurance industry shifts with the ebbs and flows of society, the best players of the game are looking for windows of opportunity to make their mark on the board and be the last surviving king. One way to do this is by looking at acquisitions and mergers.
A key player in the global insurance board is Markel International Insurance Company. The organisation has a presence in numerous insurance markets across the world, including Canada. Markel Canada, was formerly known as ESR and has been in existence since 1966.
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Karen Barkley, president of Markel Canada, told
Insurance Business about the firm’s acquisition culture and what the insurance giant looks for before it swoops in and makes a move.
“From a Canadian perspective, what we would look for before an acquisition is an underwriting portfolio (carrier or MGA) that performs in the 40% loss ratio range,” said Barkley. “Markel is a very underwriting-driven purchaser. We always look to the underwriting results. Our preference is to look for continuation of the sector and ways to expand our own portfolio in the sector.”
Markel Canada serves the property and casualty space. At present the company has no desire to dive into other markets but it is looking at ways to expand the care sector in Canada, according to Barkley.
She said: “In the US and the UK, the care sector has been broadened to include some services alongside underwriting. We might look to expand in the same way in Canada in order to improve that sector. The only other insurance space we could buy into in Canada is life insurance, but I don’t think we would do that because the market is already quite saturated.”
The acquisition framework is the same for all Markel divisions throughout the world. They are all looking for a loss ratio in the 40% range. Also, any service under consideration would need to perform with a return on investment (ROI) of 10-15% to make the deal work.
Insurance is a complicated industry, which demands forward-thinking and strategizing for success. But there are always new players bringing diversity to the table, which incumbent insurers have to deal with.
The rise of insurtech is one such example. Would Markel Canada consider buying into the insurtech industry to gain a leg-up into the future? Not at the moment, according to Barkley.
“We are obviously spending a fair amount of money on technology,” she said. “But if Markel did buy into the non-insurance industry it would be via Markel Ventures.”
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