Speaking at an industry event at The Willis Building in London, Ursano said that the soft market is fuelling the search for growth, diversification and specialization that can be achieved through M&A.

Citing the factors likely to drive future M&A activity, Ursano said that the size and scale of insurance companies was becoming increasingly important for rating agencies, investors and clients, and that M&A would satisfy the pent-up demand for liquidity from private equity owners.

He said that so far in 2009, insurance M&A volume has been light, with deals completed at an average price of 1.09 times book value. This is in contrast, he said, to specialty insurance M&A transactions that took place before the financial crisis in which the average price was 2.46 times book value.

Ursano said that as markets stabilize, valuations boost confidence and acquisition financing capacity and terms improve, we expect to see a significant increase in M&A activity in the insurance space. He added that while the outlook is positive, it must be remembered that more than 50 percent of insurance deals have failed to create shareholder value due to a number of factors, including difficulty assessing the profitability of the target, the cyclical nature of the insurance market and the volatility of the financing markets.