Insurers should exercise prudence when growing and diversifying their businesses, AM Best warns.

The ratings agency says there is no one-size-fits-all blueprint, but synergies between a company’s overall strategy and skill set are imperative.

“Growth and diversification are two leading reasons companies look to expand, but it must be done prudently. The key is to find the approach that best fits the company and its skill sets.” 

Interest in mergers and acquisitions (M&A) has picked up, most notably among reinsurers, as pressure mounts on management to achieve better returns, AM Best says.

The agency says co-operation agreements have emerged as a popular way for global insurers to partner with players that are more familiar with markets of interest.

“Sharing of business underwritten by those familiar with the local markets allows for a greater diversification of risks.”