Generali enterprise manager says insurance sector is 'ripe' for change

Solvency II could spark a series of acquisition and consolidation deals as insurers attempt to deal with changes to capital requirements.

According to Italian-based insurer, Generali Group, the introduction of measures to improve the solvency system for EU insurance companies is likely to see a reduction in the size of the industry.

Paul Caprez, head of enterprise risk management at Generali, said because the insurance sector had not gone through the same round of consolidation as other industries, such as motor manufacturing, it was "ripe" for change.

He said consolidation would help insurers to achieve the benefits of diversification as the group's capital requirement would be less than the sum of parts.

Fitch Ratings has insisted that although Solvency II could act as a catalyst for mergers and buy-outs, the dynamic of the insurance industry was different to other sectors, which have a much larger capital expenditure requirement.

But Chris Waterman, senior director in the insurance division of Fitch, said: "The burden of Solvency II regulation will generally mean that it is not economic for small companies to continue to operate."

He added that larger companies, which historically had grown through the acquisition of companies in other territories, would look to turn subsidiaries into branches to ensure all parts of their business fell under one regulatory body.

Solvency II, which should be implemented in four years' time, is not expected to cause widespread upgrades or downgrades by rating agencies.