Swiss Re expects the global reinsurance industry to consolidate as the distinction between insurers and reinsurers become increasingly blurred, an executive from the Swiss Group said in Baden Baden, reports Reuters.

"We are at the beginning of a wave of consolidation," said Frank REICHELT, Swiss Re's Market Executive for Northern, Central, and Eastern Europe. As insurers expand into the reinsurance business, reinsurers have also started underwriting more classical insurance business to retain access to certain markets, he said.

He added that a series of deals such as Axa's takeover of the reinsurer XL Group accelerated the trend of blurring the lines between insurers and reinsurers, while the reinsurance industry is challenged by the excess of capacity and has to compete with new entrants such as hedge funds which are weighing on margins. "The reinsurance industry currently does not earn its cost of capital," REICHELT commented.