The international insurance industry is poised for another period of intense consolidation, with 52% of companies expecting to use acquisitions to enter new markets over the next three years.

A survey by KPMG International and the Economist Intelligence Unit released yesterday finds competition is also diluting some of the global industry’s profitability.

Brian Greig, Chairman of KPMG’s Australian insurance arm, says the local market will experience some of the coming change. He warns insurers that pricing will be a big issue over the next few years.

“In Australia, general insurers have in recent years enjoyed the benefits of disciplined underwriting, legislative reform, strong investment markets and continued focus on cost control,” he said.

“The industry is now in a position where it can choose to maintain the current positive cycle by remaining disciplined in its underwriting, or succumb to the historic temptations of ‘growth above quality’ and trigger the onset of a soft cycle.”

Australia’s market is more mature than many, but Mr Greig predicts it will be the source of some consolidation by 2010. Suncorp and IAG have been labelled possible targets, with the possibility of large banks attempting to buy into the sector.

The survey asked 148 executives from global insurance companies their views on the industry’s near future. As well as consolidation and pricing discipline, they saw risk management – particularly of weather-related phenomena – as the big issue for the coming years.