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23 July 2015 | Corporate

July 2015: Q the CEO

Question to Philipp Wassenberg,  CEO and President of Munich Re of Canada

Philipp, we currently see a big wave of mergers and acquisitions within the insurance industry. Did we reach the peak of the wave?

I don't think so. Given the current economic environment, I think we are in the early stages of insurance M&A, so I am pretty sure there is more to come. This recent trend had started with British and US companies only in the last 18 months or so.  And now it is already spreading at incredible speed and with global reach -  a consequence of the high level of capitalisation throughout the entire insurance industry. Confronted with a significant lack of alternative investment opportunities – especially into traditional growth segments, M&A has become one of the few remaining options still providing profitable growth fantasies, both to shareholders and analysts.

Canada has not been immune to the M&A trend either.  Aside from the larger transactions (Manulife and Standard Life, Desjardins and State Farm, Dominion and Travelers, Intact and AXA\Jevco\Metro General and finally Canadian Direct), some of the larger players have begun to focus on acquiring smaller, regional companies to diversify portfolios and to expand or solidify regional exposures. Brokers also continue to consolidate with major players looking to broaden exposure and experience across the market. In addition, we expect further M&A’s as legislation is now in place for possible demutualisation.

What makes the situation in Canada specifically interesting is the fact that the Reinsurance reality will be strongly influenced by M&A activities happening somewhere else in the world. We do expect that this will have a significant influence on the decision making related to the allocation of Natcat capacity  in Canada, e.g. for the Cascadia or Quebec earthquake scenarios.

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