As concentration in reinsurance increases, those players who want to secure a stronger place in the market, or just stay relevant, have three organic options: expand their offerings, expand where they play, or expand their relationships, Boston Consulting Group (BCG) analysts highlight in a recent report.
For over four decades, the reinsurance industry has grown “in lockstep” with gross domestic product (GDP).
However, while the three largest reinsurers held a combined market share of 34% between 1980 and 2015, this figure dropped to 27% by 2023, according to BCG.
During the same period, the combined share of the 12 next-largest companies grew steadily, reaching 38% in 2023. Meanwhile, new entrants have captured only a limited share, the report noted.
Analysts acknowledge that every segment faces its own challenges, but highlighted that companies need to determine where they can generate new sources of revenue if they “want to secure a stronger place in the market – or just stay in the game.”
The increasing concentration within the reinsurance market is making it more challenging for individual companies to remain relevant.
To strengthen their market position or survive, these companies have three organic strategies available, analysts suggested.
Expand Their Offering: With global uncertainty on the rise, reinsurance is becoming a powerful tool for managing volatility. Reinsurers can open new avenues for growth by going beyond traditional business lines that cater to clients evolving needs.
This includes specialty segments and coverages, such as cyber, climate, and parametric policies, as well as developing alternative risk management solutions that diversify the ways in which risks are managed or provide access to alternative sources of risk capital.
Expand Where They Play: Significant opportunities for geographic expansion often remain unexplored. As clients seek support in new markets, reinsurers who can be present or even lead the way in these regions can strengthen existing relationships and forge new, long-term prospects, particularly in high-growth areas with burgeoning insurance demand. Geopolitical shifts, such as changes in tariffs and trade policies, may also present unforeseen expansion possibilities.
Expand Their Relationships: Deepening ties with current clients and brokers is identified as the most reliable route to new business and crucial for retaining existing revenue. Reinsurers can capture a larger “share of wallet” by offering value beyond mere capacity, extending into areas such as analytics, advisory services, and capital solutions.
The report also acknowledges the potential of mergers and acquisitions as an option for some companies to achieve fast and effective growth. Canada Life Re’s and other reinsures have demonstrated how acquisitions can quickly increase scale and bring new capabilities in-house. However, analysts warned that this could be a narrow path for most players, with limited targets that are both strategically and operationally compatible to make a financial impact.
Another option provided by analysts for reinsurers to achieve growth is “stepping aside, stating: “Sometimes, the best move is a hard-nosed decision to withdraw. For some insurance groups and investors, reinsurance may no longer be an attractive strategic play, despite being a powerful tool for managing volatility in today’s uncertain environment. Capital and leadership attention might yield stronger returns elsewhere. Exit may be the best path, but it requires its own process of careful planning and precise execution.”
Regardless of the chosen path, BCG analysts emphasise that reinsurers must act decisively.
This will require “a sharp, unbiased analysis of the landscape (including opportunities and internal and competitive obstacles), a clear strategy, and decisive execution.”
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