Takeovers will take off in the insurance market

Takeovers will take off in the insurance market - at Moneyweek.co.uk - the best of the week's international financial media.

The insurance sector, as it suffers from heavy claims, poor share performance and regulatory investigation, is widely seen as ripe for consolidation, says James Daley in The Independent. But it wont be plain sailing. Just last week, Corvus Capital Inc, a UK investment company run by financier Andrew Regan, said it would not bid for Royal & Sun Alliance. This proposed deal, announced on 13 June, was described as one of 'several' potential takeover opportunities. Corvus now says that it won't bid because RSA's managers didn't cooperate, say Jonathan Rosenthal and Jon Menon on Bloomberg.com. RSA has underperformed the sector as it has been hard hit by US losses related to asbestos claims, US workers' compensation payments and falling stockmarkets.

Corvus is not the only investment company to find insurance a stumbling block. Last year, Capital Insurance Holdings, a Warren Buffett-backed vehicle led by Michael Wade, pledged to 'kick-start' the industry's consolidation by bidding for a string of smaller players. However, the venture never got off the ground. Not only did last year's plan fail, but this year US regulators have made the worlds greatest investor angry. For Warren Buffett, the unthinkable is happening, says Ian Watson in The Business. His integrity has been questioned. Investigators have launched a probe into suspect insurance contracts at American Insurance Group (AIG), the worlds biggest insurance company, dragging Buffett's General Re into the fray. AIG admitted that a deal with General Re was 'improperly documented' and it is now being investigated by New York Attorney General Eliot Spitzer and the US Securities & Exchange Commission. Buffett has denied all knowledge of any irregularities and said he will co-operate fully with the investigators.

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