Global non-life run-off liabilities are estimated to have risen to $864 billion in 2021, according to PwC’s 2021 Global Run-off Survey.
PwC’s survey was produced in conjunction with Insurance and Reinsurance Legacy Association (IRLA) and Association of Insurance & Reinsurance Run-Off Companies (AIRROC).
The survey revealed that a majority of respondents suggest the three largest territories — Continental Europe, UK and Ireland and North America — for legacy deals will experience a similar or greater level of activity over the next two years compared to the previous two years.
Of these territories, North America showed the highest proportion of respondents noting that there will be a greater number of legacy deals, with 77 per cent of respondents expecting a greater increase in activity.
PwC run-off estimate on the US has increased by $37 billion driven by growth in the motor, property and casualty classes of business.
The North America region continues to dominate the global run-off market, with reserves of $402 billion, however, the UK and Continental Europe markets have a combined reserve of $302 billion. PwC estimates of the run-off liability in other key territories, including Asia, the Middle East and South America, have also increased to $160 billion.
Respondents were asked to rank the lines of business they thought most likely to transact over the next three years. Workers’ compensation, professional liability and asbestos, pollution and health (APH) were identified as those most likely to transact, which is broadly in line with what has been experienced in recent years.
On market evolution, the majority of respondents believe the global legacy market is in the growth stage of its evolution.
While only one in 10 believe the market has reached maturity, a noticeable contingent responded that the market is continuing to emerge and take-off.
With views from the market, Arndt Gossmann CEO, Gossmann & Cie Group, says: “The Continental Europe legacy market will deploy its potential, yet COVID-19 implications, as well as regulatory requirements, will accelerate the adoption of capital and cost optimisation strategies. We expect the market potential to hit €500 billion within three years.”
Brian Johnston, CEO, Genesis Legacy Solutions, states: “In today’s challenging economy and hardening marketplace, the legacy acquirer can be the perfect partner for the captive insurance community. There is an underserved market, especially for the smaller captives and risk retention groups (RRG) in the US.”
He adds: “As corporates review their business models, and assess needs as well as opportunities, some are looking to release trapped capital by disposing of non-strategic captive vehicles or opting for a reinsurance structure to remove their legacy liabilities."
