LONDON (Bloomberg) — Stephen Catlin, who is selling his Bermuda-based insurer to XL Group Plc for $4.2 billion, expects the pace of mergers among smaller insurers to gather pace.

“Anyone who has got a market value of less than $5 billion wherever they are in the world are going to be scratching their heads as what to do next,” Mr Catlin, founder and chief executive officer of Catlin Group Ltd, said in an interview on Tuesday. “My peer group have all said well done. The deal was a good idea, not one has said what the hell are you doing.”

XL Group, based in Dublin, agreed to buy Catlin last month for about £2.8 billion to strengthen its position amid competition from hedge funds and other investors to underwrite insurance. Catlin shareholders are scheduled to vote on the takeover, recommended by the board, in the second quarter.

“As far as I can tell shareholders on both sides are happy,” Catlin said. “If you think the market is going to consolidate, there is nothing that is going to stop it, so why wouldn’t you be on the front foot and choose your partner.”

Mr Catlin said the company, which was established at Lloyd’s in 1984, was not on XL Group’s list of potential acquisition targets until he ran the idea past CEO Mike McGavick on a plane back from Brussels more than a year ago. Mr Catlin will remain executive deputy chairman after the combination and intends to hold new XL shares as a long-term investment.

Consolidation among US reinsurers was already underway after RenaissanceRe Holdings Ltd struck a deal in November to purchase Platinum Underwriters Holdings Ltd. Axis Capital Holdings Ltd also agreed last month to merge with PartnerRe Ltd, combining two Bermuda-based reinsurers with a total market value of almost $11 billion.

“If somebody consolidates for fear of pricing pressure, it’s probably not a good idea,” said Catlin. “If you are on the back foot you will have your partner chosen for you.”