Increased merger and acquisition (M&A) talk has prompted industry observers to question how much more industry consolidation needs to occur before the Australian Competition and Consumer Commission (ACCC) puts its foot down.

JP Morgan analyst Shane Fitzgerald told Sunrise Exchange News while there is still “some room for consolidation” in the commercial lines market, personal lines is already almost at capacity in terms of consolidation.

“In no particular order, IAG, Suncorp, Promina and Allianz already have about 90% market share of the personal lines market, and in my opinion there’s absolutely no chance the ACCC would allow any big mergers there,” he said.

Mr Fitzgerald says from an analytical view, the M&A issue should be spilt into two categories: personal lines and commercial lines.

Some companies that rank towards the bottom end of the top 10 insurers might be logical fits for some of the bigger players, but it all depends on the goals of international parent companies and the types of business the companies write.

He says a takeover of Allianz – which has been listed in the past as a possible target of the larger insurers – is a difficult acquisition prospect because of its personal lines concentration. On the other hand, Zurich is a better prospect because it doesn’t carry many personal lines classes.

While the industry has always been wary of the regulators introducing a system similar to the banking sector’s “four pillars policy”, Mr Fitzgerald says that policy is political in nature and it’s unlikely a similar policy would be enforced on insurers.

As for the speculation about Zurich being sold, Mr Fitzgerald says the insurer’s international parent would still view the Australian industry as being a very profitable market. “There have been some problematic areas of its Australian business – especially with all the [accounting] issues – but that in itself is probably not a reason for its parent to sell.”