The wave of multi-billion dollar mergers that some had predicted for the Bermuda insurance market has not materialised, but the Island's companies have been adding to their size in other ways.

That was the conclusion of a session on mergers and acquisitions (M&A) at the Standard and Poor's / PricewaterhouseCoopers Bermuda (Re) insurance Conference on Friday.

The panel included representatives from the two Bermuda companies that have made major acquisitions in recent months — PartnerRe, which acquired Paris Re for $2 billion, and Validus Holdings Ltd., which took over IPC Holdings Ltd. in a deal worth around $1.7 billion.

Moderator and PwC partner John Marra said there had been "a lot of talk and a lot of activity, but very little getting done" in terms of M&A.

Joseph Consolino, chief financial officer (CFO) of Island reinsurer Validus Holdings Ltd., said: "Away from the headline-grabbing deals, there is still buying going on.

"Everybody's a buyer of teams, talent and small operations. Those are the sorts of transactions that continue to get done, but they fly under the radar."

PartnerRe chief financial officer Albert Benchimol said he was not surprised that much of the merger talk had come to nothing, because of the high risk and sheer complexity of merging two companies together.

"A lot of things can go wrong," Mr. Benchimol said, adding that buying a company meant buying its people, relationships, history and culture — and compatibility was essential.

He said there were two distinct scenarios in which he could see mergers taking place over the next few months. In demand-driven mergers, one company could combine with another when it looked to "go to the next level" in terms of size, as PartnerRe sought to do with its merger with Paris Re.

He also expected to see supply-driven mergers, where distressed sellers might be available at low prices.

Making clear the rationale behind an acquisition to clients was another crucial aspect.

"A communication plan is a very important part of an acquisition," Mr. Benchimol said. "If you're not making an acquisition to enhance your ability to service your clients and brokers, then you should ask yourself why you're doing it."

Mr. Marra said that low share prices in relation to book values was also a factor counting against mergers. He added there were several deals that did not get done because of a gap between the estimates of the buyer and the seller that could not be closed.

Jay Nichols, executive vice-president of RenaissanceRe Holdings Ltd., summed up his company's approach to M&A.

"We buy small and build big, because we think we are better builders than we are buyers," Mr. Nichols said.

RenRe was in the "light heavyweight division" of reinsurers, but "we punch well above our weight", he added.

"There is a need for some companies to get bigger to get away from the A- ratings cliff," he said.

Many companies' economic values were much higher than their book values and if the US dollar continued to fall in value, Bermuda reinsurers would appear increasingly attractive takeover targets to non-US buyers, Mr. Nichols added.

A member of the audience threw a question on how to approach the issue of staff members who might be squeezed out because of a takeover.

Validus, for example, has let go 16 of IPC's 30 staff since its takeover of the fellow Bermuda reinsurer in September. But the company says it gave redundancy packages that surpassed the requirements of the Employment Act and that most staff walked away with the equivalent of a year's compensation.

Validus CFO Mr. Consolino said it was essential to treat employees fairly.

"We operate a people business and I think all of us in this industry are moral people," he said.

"In a business where you are basically issuing a promise, it would be very difficult to operate if you didn't keep your word.

"Validus started off as a company with zero employees — now we have 300 worldwide. We are growing by hiring people."

He added that there were likely to be employment issues when two companies combined, but added that Validus took all matters related to careers and fair treatment of staff very seriously.

Mr. Nichols said there was a paucity of talent in the industry, which meant that people who had to be let go were often able to find a job with another company.

Mr. Benchimol said reinsurance companies were "nothing if not a collection of their staff and people". The industry did not have tangible assets to sell, like the recipe for Coca-Cola for example, but instead was based on the relationships, history and understanding of its employees, he added.

Where there was overlap in a merger, Mr. Benchimol said he would have most concern for lower level employees, who might find it harder to find another job.

"In cases like that, you have to do your best to find them alternative roles," he said. "What they don't want is a bunch of hot air and to be kept in the dark.

"They deserve transparency and fairness."