PwC has estimated the non-life global legacy insurance market has run-off reserves worth $791 billion, an increase of 8 percent compared to last year, according to its 12th Global Insurance Run-off Survey.
The survey, released at the 2019 Monte Carlo Reinsurance Rendez-vous de Septembre, found that the US market will see the most activity in terms of deals over the next two years. It suggested that the US and the UK will continue to feature larger deals than continental Europe.
Responses indicated that legacy portfolios sitting within life insurance companies will be the main source of legacy transactions in the next year with others noting that Lloyd’s of London, captives and non-insurance corporates will also feature in legacy deals.
Accounting for nearly 50 percent of the estimated reserves, the US continues to remain the largest run-off market, while Europe is estimated to have non-life run-off reserves of $292 billion.
The report showed that non-life legacy liabilities for the rest of the world are estimated to be $135 billion, with emerging markets including Asia and South America seeing increased run-off reserves since the last edition in 2018.
Jim Bichard, UK insurance leader, PwC said: "We have observed tremendous growth in the run-off sector in the last decade as it has developed into a key component of the insurance macro market.”
“As insurance groups continue to embed the culture of repeatedly selling legacy insurance portfolios to drive capital efficiency, profitability or operational savings, I believe this market will continue to thrive as a way to create significant value."
Andrew Ward, Director in PwC’s Liability Restructuring team, added: “The non-life run-off sector is very active and our survey expects this trend to continue over the next few years, with the US expected to be particularly busy. We expect to see larger deals and more deals involving non-traditional run-off lines of business including non-insured corporate liabilities.”
“We also anticipate that disruption through technological advances in the life insurance market will lead to transactions facilitated by legacy solutions. These developments will see run-off acquirers evolve and adapt their operations to meet the expectations of both sellers and regulators.“
