Swiss Re boss Stefan Lippe expects to see more mergers and acquisitions in the insurance industry as companies seek to make good use of the capital accumulated last year.

The chief executive officer of the world's second-biggest reinsurer was speaking on a panel on the opening morning of the World Insurance Forum yesterday at Tucker's Point.

Mr. Lippe was answering a question from the floor about how the industry would use its surplus capital, which rose by approximately $20 billion in the space of 12 months up to year-end 2009.

"There will be an M&A wave in the next two years in the insurance market," Mr. Lippe said.

Many expect more consolidation to happen in the Bermuda market, which has seen three major deals in the past year alone. PartnerRe acquired Paris Re, Validus Holdings merged with IPC Holdings and earlier this month Max Capital and Harbor Point Re announced their intention to carry out a "merger of equals", with the deal set to close in the second quarter of this year.

Indeed, among the approximately 200 delegates at yesterday's event were investment bankers from firms including Goldman Sachs, who would benefit from playing a role in putting merger deals together.

Neil Currie, CEO of Bermuda reinsurer RenaissanceRe, said: "Right now, there are investment bankers behind every store front and pillar trying to line up some business."

Mr. Currie, who was moderating the panel, made it clear that he was not seeking a large-scale merger, but preferred to grow RenRe through the acquisition of small teams.

"I shudder when I think about making a larger acquisition," Mr. Currie added.

For a merger to have a chance of success, cultures of the merging entities would have to match up, he said.

That sentiment was echoed by Marsh & McLennan CEO Brian Duperreault. "If the reason you're getting together is to save money, that's nice, if you can achieve it," he said. "However if it doesn't work out that way, then it gives you nothing to fall back on."

Reasons for merging ought to be multi-faceted, he said. "The most important thing is that the cultures have to be aligned," Mr. Duperreault added. "You have to be able to look across the table and see yourself."

Lloyd's chairman Peter Levene said risk had become a much more prominent issue across the financial services industry after the financial crisis. When acquiring a business, a company needs to consider whether the other entity deals with risk in the same way, he said.

"A lot of people have learned some hard and painful lessons," Lord Levene said. "Banks did not look at risk. This industry learned the lessons first about risk."

Low interest rates were forcing some insurers to rethink their business models, he added.

"Some businesses were run as an investment fund, and 'by the way, we do some underwriting in the back office'," Lord Levene said. "That business model is dead."

Liberty Mutual CEO Ted Kelly said the industry's growth of capital reflected its success, but warned company bosses not to get carried away.

"Let's not fool ourselves," he said. "The reason we are making money is that we've seen a period of low inflation for the past 10 or 12 years. Any idiot can make money when inflation is low.

"If we have a surge in inflation, then that capital could disappear in a heartbeat."

The conference is the ninth edition of WIF, a biennial event, which returned to Bermuda after being staged in Dubai in 2008.

Finance Minister Paula Cox launched the two days of industry leader panels, plus question-and-answer sessions. She said the Bermuda insurance market had "weathered the storm better than most".

She added: "The insurance and reinsurance industry is clearly the jewel in our crown."

The Association of Bermuda Insurers and Reinsurers (ABIR) wrote to Ms Cox and Premier Ewart Brown a few days ago, voicing their concerns over payroll tax increases imposed in the Budget. Ms Cox made no mention of that issue, but did say that Bermuda needed to be seen by international business as inviting and to foster a good business environment.

Geneva Association secretary general Patrick Liedtke gave an opening address in which he warned of the dangers of over-zealous regulation for an industry that had come through the credit crisis well.

"Re/insurance companies have not failed their customers and did not have to tap funds like the banks had to do," Mr. Liedtke said.

"Yet suddenly regulators feel that this industry requires considerably more capital.

"Why? To survive exactly the kind of real-life stress test that we have just passed with flying colours."