Unlocking Value in Run-Off 2010 - A Survey of Discontinued Insurance in Europe

 

The PricewaterhouseCoopers fourth annual survey, 'Unlocking value in run-off', produced in conjunction with the Association of Run-Off Companies, analyses questionnaire results from a cross-section of professionals from discontinued and live insurers in both Continental Europe and the UK. It examines the attitudes towards managing run-off business across Europe and presents a unique insight into the run-off market.

 

In this short video, Dan Schwarzmann and Achim Bauer give an introduction to the Survey, and discuss some of its key findings:

 

 

The 2010 Survey results indicate that:

  • Solvency II is focusing European insurers on books of business in run-off as a way to release capital - over half of the insurers surveyed for the report anticipate that Solvency II will drive a greater cost of capital and 68% of insurers expect Solvency II to focus them on their discontinued businesses and the exploration of exit options.
  • As a further measure of the importance insurers are placing on run-off business, 90% of survey respondents have a strategic run-off plan in place - an increase of 18% on 2007. Of those who have plans in place, 78% of plans cite commutation strategy as a component of their plans and 64% encompass an exit strategy.
  • Under half of respondents expect to use insurance business transfers as their means of exit. This is in contrast to last year's survey which showed that 98% of respondents expected an increase in transfers in Continental Europe following the implementation of the Reinsurance Directive.
  • Total estimated liabilities rose again this year to Euros 205 billion, following a fall to Euros 196 billion last year. This increase has been driven by UK insurers ceasing to write certain product lines such as financial guarantee and credit insurance, but is partially off-set by continued commutation activity in the existing run-off market.
  • According to respondents, consolidation amongst UK run-off providers and a healthy deal appetite from the traditional run-off acquirers will continue in 2010. Over 60% of respondents believe there will be more than two significant transactions in the next two years.
  • Long tail claims and counterparty interest again feature highly when respondents cited the major obstacles to obtaining finality.
  • When asked what run-off would look like in 2015, responses varied but there was some consensus around it being a highly skilled industry with growth in Continental Europe and the US

 

Previous surveys

Unlocking Value in Run-Off March 2008