A wave of Bermuda-based reinsurers that formed in the post-September 11 hard market may be less quick to consolidate than predecessor companies setting up in 1993 in response to the hard catastrophe market following Hurricane Andrew.

A flurry of merger and acquisition activity by reinsurers is unlikely to happen soon, according to market executives speaking during a panel discussion during the Fox-Pitt Kelton conference in North Carolina last month.

The comments follow widespread industry speculation that softer market conditions might lead to some companies merging with each other or being acquired. And the murmurs follow heavy M&A activity in the last decade targeting the monoline Hurricane Andrew reinsurers, often referred to as the ?class of 1993?.

In total, five of the eight cat reinsurers set up in 1993 were sold off to rival companies, with ACE Limited and XL Capital each buying up two.

Industry executives point out, however, that the new companies in the ?class of 2001? may not be sold off as readily because they don?t fill a specific niche.

As multi-line companies ? with some also involved in the writing of both insurance and reinsurance ? the 2001 companies might find they don?t make a perfect fit into a larger organisation, in contrast to the niche that the post-Hurricane Andrew property catastrophe reinsurers filled. AXIS CFO Andrew Cook said AXIS, which is one of the companies that set up in the 2001 wave of companies, had ?no desire to pursue M&A activity?.

He pointed out that the ?Class of 2001? were ?all doing different things but with overlap, so if you put two companies together you would have to cut out some of the premium?.

He added that most of the 2001 players had already built global, multi-line businesses. ?All of us are very well staffed with efficient infrastructures: I don?t see the value. I don?t see the wave of consolidation that we had in the past.?

It has also been said that companies may not want to ?dirty? their balance sheets by being involved with a company that might have ?legacy? issues from prior years, whether asbestos-related or other.

ACE Limited chairman Brian Duperreault, who stepped down as company chief earlier this year, joked: ?I did my consolidation. I bought already.?

He was speaking in reference to several strategic acquisitions made during his tenure as CEO including the mammoth buy-out in the late 1990s of Cigna?s P&C business.

Mr. Duperreault said the fact that there had not been major M&A activity was positive: ?We say consolidation is what you do when nothing else is going right. It is not normally a good sign in our business when consolidation starts taking place as it means your underlying value proposition isn?t so good anymore.?

He said he did not foresee consolidation happening unless there was a strong strategic fit or when pricing reached lows, and ruled out the value of mergers between Bermuda reinsurers.

?It will be at a time when pricing is pretty bad, and pricing isn?t that bad right now. There is not that need out there right now, so why else would you consolidate? If there are strategic reasons for it, then you should do it anytime. And I could certainly see some strategic reasons why some Bermuda companies should make acquisitions but probably not with other Bermuda companies; there is more value to be had by diversifying outside of Bermuda. That is a more logical and therefore hopefully more likely event.?

Mr. Duperreault added that it could also be that Bermuda companies would be acquired but it was not as likely.

?Are there others who might benefit from getting a Bermuda company? Yeah, it cuts both ways so it makes sense. But because of the Bermuda structure ? tax and all that ? it makes it less likely that a US tax payer would acquire a Bermuda company as there is less value. For the near-term, I think the approach should be strategic. Maybe later there will be consolidation because nothing else is working.?

Partner Re CEO Patrick Thiele, the head of another organisation ? in this case, one of the reinsurers part of the ?class of 1993? ? that saw rapid expansion through acquisitions said M&A activity in the reinsurance sector had rarely proven successful.

?The history of strategic reinsurance acquisitions has been pretty abysmal?.

He said, with the exception of Partner Re, there had been few success stories. Partner Re said it had moved from a cat-only company to multi-line, multi-geographic business because of two strategic acquisitions.

?I?m not inclined to push my luck. I don?t know that we would need or do another strategic acquisition mostly because we are in reinsurance, and in most aspects of reinsurance.

He did not rule out financial acquisitions ?when market values become attractive on a balance sheet basis. But that would be a pretty hard-eyed, and difficult acquisition from a financial standpoint?.

Renewed speculation on the M&A front, especially for those writing property catastrophe, may follow news that collectively the sector is facing billions in claims from a spate of four devastating hurricanes hitting the Caribbean and US in the last two months.

But Mr. Thiele pointed out that catastrophe reinsurers have become pretty good at weathering storms.

?Professionalism in the cat industry is exceptional (through) a blending of technology and underwriting skill, leading to relative moderation in pricing in spite of volatility (of events),? he said.