Axis Capital Holdings and 10th-largest reinsurer Partner Re have agreed an $US11 billion ($13.8 billion) merger that will create the world’s fifth-largest reinsurer.

The move was announced yesterday in Bermuda, where both companies are based.

Commentators have hailed the merger as a sign of increasing consolidation in the reinsurance sector, which has been affected by an influx of new capital. This has led to intense competition and lower premiums. 

insuranceNEWS.com.au reported on January 12 that US reinsurance giant XL Capital had bought Bermuda-based Catlin to form the eighth-largest global reinsurer. 

Partner Re says its merger with Axis Capital will result in gross premium earnings of about $US10 billion ($12.6 billion), making it the fifth-largest global reinsurer. Moody’s says PartnerRe is the 10th-largest reinsurer by premium earnings and Axis is the 22nd-largest. 

Axis Capital CEO Albert Benchimol, who was CFO at Partner Re until he moved to Axis in 2012, will head up the new company.

Calling the deal “a merger of equals”, he says the new company – which does not yet appear to have a name – will have three strongly positioned businesses: a top-five global reinsurer, a $US2.5 billion ($3.1 billion) specialty insurance underwriting business and a growing life, accident and health franchise – “all with increased strategic flexibility”.

“As a top five global reinsurer with leading positions in a number of specialty lines, we will be strongly positioned to turn the challenges presented by the structural changes in the reinsurance market into opportunities.”

Axis Specialty Australia has offices in the major state capitals and offers a range of specialty lines. Its CEO, David Smith, was not available for comment this morning.

Both companies’ regional reinsurance operations are managed from Singapore.

More details in our regular bulletin next Monday.