OREANDA-NEWS. Recent merger and acquisition (M&A) activity in the property/casualty (P/C) (re)insurance market has led to speculation that a consolidation wave is forthcoming, but recent history shows the pace of consolidation is modest, according to a new Fitch Ratings report.

Fitch's review of U.S. P/C industry market share reveals that market concentration remains relatively dispersed with only gradual market share shifts over time. Combined market share of the 10 largest U.S. insurers expanded from 47% in 2004 to 50% in 2014. However, market share for the top 50 underwriters was virtually unchanged over this period.

Among the largest U.S. insurers over the 10-year period 2004-2014, State Farm Mutual Automobile Insurance Company (State Farm) slightly expanded its market leading position. Other entities with notable gains in market position are Berkshire Hathaway Inc.'s (Berkshire Hathaway) insurance operations and Liberty Mutual Group Inc. (Liberty Mutual). American International Group, Inc. (AIG) dropped to sixth in NWP from second over this period.

Individual market segments continue to have a very large number of market participants. The personal lines segment remains more concentrated than the broader commercial lines segment due to the market position of State Farm and other large personal auto writers.

Competitive pressure on smaller insurers is promoting acquisition activity. Companies with limited scale are disadvantaged by larger peers' growing investment in more sophisticated underwriting and pricing analytics, and face adverse selection risk by not keeping pace. Regulatory- and disclosure-related costs are a growing burden, which has led to a reduction in the number of smaller publicly traded insurers over time.

The largest barrier to P/C market consolidation remains a lack of willing sellers. A relatively stable market environment in recent years has limited the number of underwriters facing financial pressure to sell. Mergers amongst the largest U.S. underwriters remain unlikely in the near term.

The full report titled 'U.S. Property/Casualty Insurer Market Concentration' is available on the Fitch web site at 'www.fitchratings.com' under 'Insurance' and 'Research'.