#ActiveAllocator Research – The Wall Street Journal today Thursday July 9, has two interesting articles on insurance. “KKR Buys Insurer to Build Asset Pool” announcing intent to acquire Global Atlantic Financial Group for $4.4 Billion and ” Allstate Buys Rival (NGH) for $4 Billion”. Clearly we are seeing some M&A activity in this sector.
Insurers are exposed to event risk from a variety of causes: Natural Catastrophes, Investment Market Disruptions and of course now, Pandemic – death claims, morbidity losses, investment losses, operations risk. Historically, many insurance firms have responded to such events by raising equity capital after the event – at depressed prices. None anticipated the specific triggering event, but all recognized the potential for tail events. I observe that all were required to raise capital at highly depressed values in order to survive, to maintain ratings or even solvency.
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