Editor's comment: A very expensive meal

Both of these stereotypes were thrown out the window last week when Zurich-based Ace offered a whopping $28.3bn (£18.1bn) to buy out high-net-worth property insurer Chubb – in a deal that shocked the market.

The purchase has been labelled by banking analyst Dealogic as the second largest insurance deal in history, after the US government bailed out AIG for $58.9bn in 2010, but if we don’t count that bailout then the Swiss are responsible for the biggest true insurance deal the market has ever seen.

Market insiders were gobsmacked by both the price tag – especially as the takeover will incur additional costs – and the rationale, with question marks remaining over whether these firms complement each other, whether the firm just had cash to burn or if, like the Willis Towers Watson deal that was announced the same week, it just wanted to rule itself out of being bought.

The one thing about the deal that has made sense is the keeping of the Chubb branding, because it’s one that has a good reputation and relationship with brokers. Suggestions have also been made that the Chubb management – led by European CEO Jalil Rehman – should remain, although time will tell if this actually happens.
It’s clear this new powerhouse is likely to change the insurance landscape very quickly and be a force to be reckoned with.

In the UK, for example, the past two years have seen Ace move continually onwards and upwards to number six in AM Best’s annual Top 100 UK Insurers listing – and this deal is likely to see it snapping at the top five position and giving Direct Line Group (UK Insurance) and Axa Insurance UK something to worry about, with its combined gross written premium of £3.1bn.

The state of the current market with its rapid consolidation pace has been labelled as mad and maybe the recent heatwave has gone to people’s heads.

As usual we are being warned to expect more of the same as insurers resort to ‘eating each other’s lunch’ rather than innovating and underwriting their way to organic growth but can we truly see this continuing?

Analysts are seeing targets on the back of every firm and the message to the market is clear – if you are not looking to eat up the competition then someone is surely looking to eat you.