Larger non-life legacy deal sizes reflect trust in the market

• Legacy transactions with estimated gross reserves of US $9.4bn in the 12 month period to 30 June 2023 
• Overall deal value increased compared to prior year, concentrated in a third fewer deals
• First quarter of 2023 saw record deal activity
• Opportunity for legacy players to partner with live insurers as they scale back from writing certain lines of business in their journeys towards net zero

[MONTE CARLO, 11th Sep 2023] The global non-life run-off market remains active, with US $9.4bn of estimated gross reserves transacted across 37 publicly announced deals in the 12 month period to the end of the first half of 2023. Compared to the same period in the prior year, there is an almost identical total deal value (US $9.3bn in the 12 months to H1 2022), but a third fewer announced deals (37 deals in the 12 months to H1 2023 vs 55 deals in the 12 months to H1 2022). 

The first quarter of 2023 saw record deal activity, with a concentration of large deals involving LPT/ ADC and RITC transactions, both at Lloyd’s and in the company market. This reflected a general shift towards demand for reinsurance-based capital relief solutions. The trend towards more reinsurance-based structures has seen some transition for a legacy market that has traditionally seen expertise in liability management as a core driver of value creation.

Andrew Ward, Liability Restructuring Partner, PwC UK, commented:

“The larger deal sizes we’re seeing reflects trust in the market. While deal activity has slowed since the record first quarter as large deals have been digested, we expect a number of deals of varying sizes to complete in the remainder of 2023. The ongoing hard market, abundance of buyer capital and increased focus on deal generation by  intermediaries means the legacy sector will continue to remain buoyant.

“The market has generally retained good pricing discipline, meaning deals have been left on the table  - although we’re now seeing some of these deals returning to the market. While the US and Lloyd’s markets will continue to be active, opportunities exist in Europe and AsiaPac, as well as in different classes of business, such as motor and transactions involving more recent underwriting years. These all require differing approaches to risk assessment, due diligence and operational capability - challenging buyers to be flexible in their approach .”

Further evolution in the acquirer landscape is expected, with new entrants, consolidation and some exits possible as business plans develop. Several acquirers have recently been focused on post-deal integration and value creation, investing in areas such as people, operational efficiency and IT. 

Andrew Ward, Liability Restructuring Partner, PwC UK, continued:

“As CEOs and COOs seek to match the development of their operations with the growth of both  assets and liabilities under management, we’ve seen an increased focus on investment in IT infrastructure, including the consideration of AI tools. Many players are already seeing value in taking these steps both in their existing portfolios under management and in their deal processes. The investment in these areas is overdue but signifies the market is here for the long term.”

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