Ex-DARAG CEO unveils new carrier backed by Munich Re

Former DARAG CEO and current SOVAG chairman Arndt Gossmann has revealed plans to create a new risk carrier focusing on portfolio restructuring of non-life insurers in Europe with Munich Re as its reinsurance partner.

The product with the working title ExPRO – Expiring Policy Roll-Over allows the ongoing transfer of insurance contracts expiring in the future to an external risk carrier, according to a statement. This enables insurers to release equity by directly neutralising in their balance sheets all business that will no longer generate revenue in the future. The approach takes into account existing outstanding claims reserves as well as prospective risks.

“We want to offer insurers an opportunity to optimise their portfolios long before entire portfolios accumulate for run-off. With our innovative ExPRO approach, such a roll-over of expiring policies will soon not only be easier and quicker, but also more cost-efficient than the sale of legacy portfolios practised to date,” says Gossmann, founder and owner of Gossmann & Cie., whose risk carrier will assume the policies in future.

Gossmann & Cie. estimates the volume of such expiring policies at around 4 percent of the insurance business, which corresponds to a market potential of more than €10 billion per year in Europe.

Gossmann was appointed chairman of the management board of Schwarzmeer und Ostsee Versicherungs-Aktiengesellschaft SOVAG in Hamburg in May 2017, and tasked with its restructuring. He will be leaving as planned on March 31, 2019 once all measures have been implemented.

Between 2009 and 2017, he led DARAG Deutsche Versicherungs- und Rückversicherungs-AG and expanded its run-off insurance business internationally.

“Together with Munich Re’s experts, we have now succeeded in developing a mathematical procedure that uses methods of complex data analysis to extrapolate future loss experience,” Gossmann said. “For the first time, terminated or no longer renewed policies can be transferred to a third-party insurer on an ongoing basis and at a fixed price agreed in advance,” he noted.

With ExPRO, the ceding insurer can release the capital and operational resources tied up by the ex-client immediately after the termination of a client relationship. This instrument allows the insurer to focus the use of capital on active client relationships and future growth.

The ExPRO solutions are to be offered from the second quarter of 2019. Munich Re will accompany the transactions as a strategic partner and assume the majority of the risks as reinsurance partner. The specialist insurer will operate throughout Europe. Initially, the focus will be on the German, Austrian, Swiss, French and Italian markets. Expansion to other countries is also planned in the medium term. The management team will be introduced in March 2019.

“We have pitched the idea to selected insurance directors in recent months and have met with lively interest. We expect a dynamic course of business as soon as the product is launched in the second quarter of 2019,” Gossmann said.

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