Run-off in Europe tipped to reach new high of €8bn in 2017

The run-off market in Europe will hit new highs in 2017 with the value of deals potentially double what they were in 2016, the chief executive of one run-off specialist has claimed.

Arndt Gossmann, Group CEO of run-off specialist DARAG, said many European insurers are now entering the run-off market at the same time meaning the market will see intense activity superseding the approximately €4.4 billion of deals completed last year.

“For this year, once again, we foresee a new peak,” Gossmann said. “We expect the total volume of non-life run-off deals to reach €8 billion within 2017 and to see the first €1 billion worth run-off transaction that comes from the mid-market.

“This increase in deals is not surprising given that Europe’s biggest insurers are entering the run-off market all at once. Many of these companies had already put in place their strategies and plans for transferring closed books of business in areas that will offer maximum capital relief, yet waited until the Solvency II regulation was finalised and in force before going forward with them.

“The mid-market is bound to follow. All this creates an explosive market of opportunities. However, most run-off is driven by Solvency II requirements. It will take a bit more time until it is widely acknowledged as an efficient capital management strategy. Still, we are getting there’, he concludes.”

Gossmann also makes a number of other predictions for the run-off market in Europe in 2017. These include more run-off opportunities and transactions coming from the Continent; the onset of more diverse and aggressive pricing; insurers adopting a more personalised and differentiated value proposition as they target younger generations; further disruption in the industry caused by technology; and a growing influence of alternative capital in the run-off sector.

“The legacy sector is influenced and shaped by the regulatory, political, societal and economic trends surrounding it. Recently, the insurance industry has been presented with various challenges, some – like Brexit – rather unexpected,” Gossmann said.

“One thing is for sure: change is an absolute certainty. For insurers, structured solutions for inactive business are key to successfully responding to uncertainties resulting from such a dynamic environment. DARAG is confident that the run-off market will gain strength in the coming years as the re/insurance industry embraces the advantages offered in its quest to succeed in an ever-changing competitive landscape.”

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