CONSOLIDATORS LOOK FOR SCALE AND DIVERSIFICATION, REPORTS WILLIS RE

Tiering of reinsurers by buyers has gained wider traction as cedents look for wider, cross-class relationships which they believe will prove to be more sustainable over time, Willis Re said in its First View renewals report. The broker said this trend is putting increasing pressure on smaller reinsurers and monoline catastrophe writers who have the additional burden of competing with the capital efficient and highly competitive capital market-backed funds and sidecars. Willis said there was some evidence of market changing structures where primary carriers directly access capital markets through sidecar-type structures, entirely bypassing the traditional reinsurance market. In terms of mergers and acquisitions, Willis Re said consolidators looking for scale and diversification are moving as valuations become more reasonable for both parties, given the limited supply of attractive target companies.