Insurance deal making is heating up as companies embrace a bigger-is-better philosophy.

AXIS Capital Holdings Ltd.’s plan to merge with PartnerRe Ltd., creating a firm with a combined market value of $11 billion, marks the third sizable deal for a Bermuda-based insurer since November. Insurance companies are turning to acquisitions amid increased competition and declining policy rates. Those pressures are likely to drive even more deals in 2015, according to Nomura Holdings Inc.

“It’s picking up steam,” Matt Carletti, a Chicago-based analyst at JMP Securities, a unit of JMP Group, said in a phone interview. Acquisitions have “been more frequent and getting bigger. That’s sending a clear signal that we are likely to see more deals as 2015 progresses.”

Potential targets include Montpelier Re Holdings Ltd. and Aspen Insurance Holdings Ltd., which last year rebuffed takeover advances from Endurance Specialty Holdings Ltd., said Cliff Gallant, a San Francisco-based analyst at Nomura. Others that could draw interest are Argo Group International Holdings Ltd. and Infinity Property & Casualty Corp., according to Stifel Financial Corp.’s KBW.

There were about 390 insurance transactions announced last year for a combined value of almost $50 billion, according to data compiled by Bloomberg. That made it the industry’s busiest year for deal making since 2008.

Acquirers spent $17 billion on property and casualty, multi-line insurance and reinsurance deals, the most since 2011.

Going Big

The latest round of acquisitions is a symptom of hedge funds and other investors entering the market. The influx of new participants has led to lower policy rates, which have in turn eroded margins and driven insurers to build bigger and more diversified portfolios to stay competitive.

Potential buyers “will see no way of getting their growth or actually keeping themselves from shrinking, or margins deteriorating, and they see this as their only option,” Ace Ltd. Chief Executive Officer Evan Greenberg said on a conference call in October. “That hunger builds. I expect you’ll see more M&A activity as time goes on. I expect you’ll see more of a feeding frenzy for what comes to market.”

Floodgates Open

In just the last three months, RenaissanceRe Holdings Ltd. agreed to buy Platinum Underwriters Holdings Ltd. in November, then XL Group Plc followed with a deal valued at about $4 billion for Catlin Group Ltd. Axis Capital and PartnerRe announced their plans to merge on Sunday.

“It’s like the floodgates have opened,” Amit Kumar, an analyst at Macquarie Group Ltd., said in a phone interview. “Some of the smallest companies will definitely be asking themselves, ’Should we also be pursuing something?’”

Aspen Insurance and Montpelier could be among the next acquisition candidates, said Gallant of Nomura. Aspen rejected an offer from Endurance that was later terminated. The company closed Monday at $44.18 after rising as much as 2 percent following the news of AXIS’ deal.

Montpelier is a good example of an insurer that may not have enough scale to stay competitive in this environment, said Meyer Shields, an analyst at KBW.

“If they can find the right deal, even without a generous premium, it may be the only way of securing any type of future for them,” Shields said in a phone interview.

Other Targets

Other possible targets may include Argo, Infinity and Navigators Group Inc., he said. All three are valued at about $1 billion.

A representative for Aspen declined to comment. Representatives for Argo and Montpelier, both based in Bermuda, didn’t respond to requests for comment; nor did representatives for Birmingham, Alabama-based Infinity or Navigators Group.

“The smaller companies are under more pressure to do something,” Gallant of Nomura said. “There’s more and more pressure to be big, to be important to your clients. We expect more activity.”