QBE and IAG have been busy this summer adding to their growing Asian portfolios, but speculation that they could be now looking in their own backyards for potential takeover targets mightn’t be too far off the mark, according to market sources.

KPMG Chairman of Financial Services Andries Terblanche told Sunrise Exchange News mainstream media speculation last week that QBE is looking for local acquisitions “wouldn’t be a surprise at all”.

He also expects large local insurers will continue to look for international acquisitions.

Mr Terblanche says market softening is leading insurers to look at a number of different ways to boost profits.

“The industry has come off its period of growth and the market is softening, and it’s at that point insurers are looking at M&A activity.”

An article in last week’s Australian Financial Review revived the 15-month-old rumour that No 1 insurer (in terms of premium revenue) QBE has its eyes on IAG as an acquisition target. (It also said Promina is probably in its sights, too.) Both companies have again denied the rumours.

But market insiders have played down speculation about QBE’s local growth plans before, saying Australia is relatively “small cookies” for the insurer, which conducts more than 70% of its business offshore.

In contrast, analysts say a degree of consolidation within the commercial market would probably get the thumbs-up from the Australian Competition and Consumer Commission. But further consolidation of the already heavily consolidated personal lines market is less likely, and would most likely be rejected.