By Alexander Hübner
BADEN-BADEN, Germany (Reuters) - Swiss Re (S:SRENH) expects the global reinsurance industry to consolidate as the distinction between insurers and reinsurers become increasingly blurred, an executive of the Swiss group said on Monday.
"We are at the beginning of a wave of consolidation," said Frank Reichelt, Swiss Re's Market Executive Northern, Central, Eastern Europe at an industry conference in Baden-Baden, Germany.
As insurers expand into the reinsurance business, reinsurers have also started underwriting more classical insurance business to retain access to certain markets, he said.
He added that a series of deals such as Axa's (PA:AXAF) takeover of reinsurer XL Group accelerated trend of blurring the lines between insurers and reinsurers, which offer to share risks insurers take on in return for a slice of the premiums customers pay.
The reinsurance industry is ailing under overcapacities as new entrants such as hedge funds have started to underwrite reinsurance business, weighing on margins.
"The reinsureance industry currently does not earn its cost of capital", Reichelt said.