LONDON (AFX) — Berkshire Hathaway-owned National Indemnity Co’s assumption of Equitas’ liabilities in a $7 billion reinsurance deal last week could trigger a wave of mergers and acquisitions within the Lloyd’s of London insurance market, credit rating agency Standard & Poors said.

It said that Tuesday’s announcement by Wellington Underwriting PLC that it was in talks with Catlin Group PLC, which could lead a takeover offer from Bermuda-based Catlin, could be followed by similar approaches between other Lloyd’s insurers.

“If well executed, this could provide an alternative route for a business to strengthen itself through enhanced portfolio diversification.

The recent announcement by Catlin that it is in discussions regarding a potential cash and shares offer for Wellington Underwriting PLC may be only the first of such deals,” said Marcus Rivaldi, a credit analyst for Standard & Poors.

S&P added that the Berkshire Hathaway deal enhances the competitive position of the Lloyd’s of London insurance market.

The credit rating agency said that it would ‘certainly expect this to have a positive impact on the long-term operating performance of existing Lloyd’s franchisees, and it may also give increasing precedence to the Market as the preferred European destination for organisations considering expansion overseas, possibly via mergers and acquisitions.’

The ratings agency said that it believes that other companies will join the likes of Hiscox Plc, Amlin Plc, Catlin and Omega Underwriting Plc in moving to Bermuda in order to reduce their tax bills.

But it said that the deal between Equitas and National Indemnity will remove the urgency felt by Lloyd’s insurers looking to geographically diversify operations.

“Without the drag of Equitas and the prospect of much improved business administrative processes, Lloyd’s existing competitive strengths would come into starker relief,” said Rivaldi.

Equitas was set up in 1996 to reinsure and manage potentially ruinous asbestos-related claims facing the Lloyd’s market, and was seen as a major stumbling block for many investors or potential buyers in the Lloyd’s market.

The deal with Berkshire Hathaway removes any residual risk that Lloyd’s investors face from asbestos-related claims.