Jarad Madea, CEO of Howden Capital Markets and Advisory, discussed the evolving landscape of capital markets and mergers and acquisitions (M&A) in the reinsurance sector during an interview with Richard Banks of AM Best TV at the Rendez-Vous de Septembre conference in Monte Carlo.
Madea addressed how innovation in capital markets is changing traditional reinsurer formations. He highlighted that new structures such as sidecars and catastrophe bonds are enabling quicker entry into the market for investors. According to Madea, "The world continues to be a very risky place. When you think about social inflation, climate change, the geopolitical situation around the globe, there’s a lot of risk out there, some known, some unknown and there’s a lot of change."
He noted that as capital flows into the market more rapidly, investors are increasingly opting for shorter-term balance sheets. This trend is driving innovation within capital structures. Madea explained: "The peak pricing has started to come down and that being said, which I think we agree, the important part is that the market is still at attractive levels. There are still attractive returns to be had for the primary insurers, for reinsurers, for ILS managers, and for other end investors across the system."
On M&A activity among insurance carriers, Madea said: “I think we’re going to see a fair amount more of carrier consolidation, whether that’s acquisitions, true mergers of equal, or other.” He pointed out that many public insurance companies are currently trading at or near 10-year highs with strong currency positions and excess profits or capital. This places them in a favorable position to consider acquisitions if organic growth slows.
Potential sellers may also find themselves reassessing their prospects as growth opportunities diminish in a hardening market environment. Madea commented: “I think we’ll start to see and feel the need for M&A and more consolidation on both the carrier side, buyers and sellers.”
Howden Capital Markets & Advisory (HCMA) has recently played roles in notable transactions such as Skyward Specialty's acquisition of Apollo (https://www.howdencapitalmarkets.com/news-insights/skyward-specialty-completes-acquisition-of-apollo-syndicate-1969-and-apollo-underwriting) and The Doctors Company's acquisition of ProAssurance (https://www.howdencapitalmarkets.com/news-insights/the-doctors-company-acquires-proassurance-transaction-details), demonstrating its involvement in major industry consolidations.
The full interview with Jarad Madea can be viewed on AM Best TV (https://www.youtube.com/watch?v=3iQvLwP1fWk).