Legacy specialist DARAG sees pre-Brexit ‘panic’ and active run-off market

Global insurance legacy specialist DARAG has seen a “flurry of activity” in the last 18 months with a number of acquisitions and funding, “and more announcements to come”, the company’s group chief executive officer Tom Booth told Monte Carlo Today.

He said the firm had had a “fantastic year” since it raised €260 million of new capital about a year ago.

“From our perspective it’s been an active market in run-off, which has been pleasing,” he said.

Traditionally the firm has focused on continental Europe, completing a number of transactions, including SOVAG, of a reasonable size.

“We’ve expanded into the UK market, which was not traditionally an area for DARAG, despite a number of people being based in London,” he said, highlighting the acquisition of two UK insurers in run-off: One Re and The Underwriter, which are both awaiting change of control approval.

“The purchases are to enable us to capitalise on our renewed strength in the London Market and connections there, but also as a sort of Brexit strategy.

“We can’t assume UK businesses are very, if at all, interested in a European-based carrier,” he explained.

“We need a UK domestic carrier to be able to assume a UK business through Part 7 in the future. We didn’t want to take any chances on that, which is why we acquired those two vehicles.”

Booth said that people often talk about the European continental market being “quite slow to take off”, while the UK run-off market has been pretty active for a decade, if not two, and the US market is also pretty active.

“The European continental market was never going to be an avalanche, nor a complete switch, but we are now seeing a steadier flow of opportunities and, given our continental European core base, we’re very well positioned to take that up.

“We’re beginning to see a few late-stage transactions which are being pushed by Brexit. I guess a number of carriers were really convinced that a ‘no-deal’ departure from the EU was not really a possibility, so a few people are now panicking and trying to find a solution to portfolios that are in the UK with European business, or vice versa.

“There’s a little bit of activity coming through that, which is always quite good for the likes of us,” he concluded.