Global Run-Off and Legacy Trends

Date: Monday, February 22nd, 2021 by Aneesah Atallah Frost.

Many of those in the insurance and legal communities expect to see an increasing number of run-off and legacy deals in 2021. The reasons for this are multiple and varied. COVID-19 has taken a toll of many international insurers’ reserves, changed the profitability of some significant lines of business; and forced everyone in the industry to examine contract wordings, both historic and current. Brexit and the requirements of Solvency II and IFRS 17 also continue to act as drivers, while in the US, the increasing use of IBTs (Insurance Business Transfers) in different
states is also driving ‘whole entity’ deal numbers.

The impacts of COVID-19 on various books of business are likely to stretch into the long- and medium-term, having an asbestos-like impact in many ways for our industry, with issues such as causation, long Covid and complexities around remote working yet to be fully tested.

PwC’s 2019 Global Insurance Market Run-Off Survey anticipated deal values of $101 to $300m in the UK alone over the period 2020 to 2022 and estimated global non-life run-off reserves at circa $790bn, with legacy management becoming part of the “new normal”.

And yet globally the picture is not aligned. In many markets, run-off is an untested concept, and in more than one territory, our legal specialists told us that they believed the regulator would be willing to accept run-off transactions, but that insurers are unwilling to put themselves forward as the first ‘test case’. As a result, there are a number of territories around the globe where transactions do not occur, in spite of the presence of global TPA specialists and interested international buyers.

In order to understand how the global run-off market is really moving, we recently asked each of Global Insurance Law Connect’s members in 20 countries around the world to classify their local run-off market, in terms of both its maturity and direction of travel.

The results are presented here, in our first ever global report on the run-off and legacy market, capturing trends across 20 countries.

 

To download the full report, click here.

 

 

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