The insurance industry is enjoying healthy profits and a low claims environment, and analysts are now backing away from speculation about mergers and acquisitions – for now at least.

Insurance stocks have been the darlings of the market for some months, and speculation can boost share prices. But leading financial services analysts now say large-scale takeover activity is unlikely in an already highly concentrated sector.

JP Morgan insurance analyst Shane Fitzgerald says six months ago everyone was denying there was a softening market, but now it’s undeniable.

“When you have profits you have more capital and you have more ability for acquisitions,” he said. “However, with revenue growth slowing, many people are suggesting there will be substantial activity. With official concerns about consolidation, I don’t see this happening.”

As an example, if IAG and Promina were to merge there would be too much concentration in motor and home insurance.

“Share prices are so strong,” Mr Fitzgerald said. “People are scratching to find reasons for mergers and acquisitions.”