DARAG’s Arndt Gossmann predicts “new peak” for run-off sector

Arndt Gossmann, the chief executive of run-off specialist DARAG, has predicted that the run-off sector in Europe in 2016 will have a transaction volume of more than €4 billion in total, and that there will be the first in a series of runoff deals worth more than €1 billion.

This is just two of the forecasts made by Gossmann who claims that the sector is set to reach a new peak in 2016. “This year, we expect the total volume of run-off deals to reach an all-time high of € 4 billion,” he said.

He said that driven by Solvency II, the volume of run-off transactions has already grown by a factor of eight, to a total of €1.7 billion from 2013 to 2014. In 2015, dynamic growth continued, especially in terms of transaction volume, fuelled by the increase in discontinued business held by European insurers.

Talking about the first €1 billion deal, Gossmann said: “The big international insurers continue to optimise their capital management under Solvency II. We expect to see the first in a streak of single run-off transactions worth €1 billion in 2016.”

Gossmann also predicted that the market will grow this year, that there will be a growing appetite for third-party investors and that the insurance industry will seek innovation to transfer risks and optimise capital structures.

He also forecast reassurance in insurance, saying: “Along with market consolidation comes the focus on specific values. Trust will dominate as a precondition for any business undertaking in 2016.”

In conclusion, Gossmann said the run-off industry had “come a long way” since 2009 when DARAG started at the first continental European insurance and reinsurance run-off specialist.

Gossmann claimed that best practices for dealing with legacy books are now emerging and that most mid-sized and smaller companies are still only at the beginning of developing their run-off strategy, meaning he is confident that the market will continue to see a dynamic growth in the coming years as well as this year.