Consolidation of the US Property and Casualty Insurance Industry : Is Climate Risk a Causal Factor for Mergers and Acquisitions?

This report analyzes the difference between mergers and acquisitions (M&As) of target insurers in the US life and non-life insurance sectors. We first document M&A transactions in the US insurance market between 1990 and 2022 and select the M&A transactions related to US target insurers. We then study the evolution of the life and non-life insurance sectors over time in order to determine whether there are parallel trends between the evolution of M&As of target insurers in these two sectors over time. We empirically test the difference between the M&As of the life and non-life insurance sectors by employing a natural experiment method and verify whether climate risk has been a causal factor in the observed difference in mergers and acquisitions between the two sectors after 2012. Our results do not support a causal link between climate risk and M&As during the period of analysis. Insurers choose other diversification sources of capital, including reinsurance, premium management, CAT bonds, and better capital management under stronger risk regulation