Run-off is now just part of the toolkit

The run-off sector is seeing increased interest as the market starts to realise its full potential, according to independent run-off service provider Pro Global Insurance Solutions (Pro).

Richard Lawson, global head of client engagement at Pro, said that the run-off market had seen perhaps two or three major transactions a year in the 2013/14 period; in contrast, now there were now dozens of transactions occurring every year.

He said that some of that was due to the arrival of Solvency II, which had prompted some insurers to dispose of blocks of business seen as non-core or non-strategic, largely for capital efficiency reasons. Another factor is the prolonged soft market, which has made writing business something of a challenge.

Artur Niemczewski, CEO of Pro, added: “The market has seen massive growth.” He said the biggest potential for growth was in the US, followed by Europe.

“Run-off is going from being a fringe activity, so to speak, an underwriting process that was a part of the toolkit of good underwriters. It’s no longer something in the back room, it’s essentially a tool to manage your underwriting and your portfolio exposures.”

Pro has for some years stressed its neutrality in terms of the way it does run-off business, and Niemczewski said the market now recognised this.

In March this year Pro launched ProTucket Insurance, the first Rhode Island domestic insurer to be formed specifically for providing run-off portfolio transfer solutions. ProTucket was created after the passage of new legislation in the state that allows companies to transfer their insurance books in a way that is already accepted in countries such as the UK.

Pro believes this is a game-changer for the US market, and is expected to release many billions in trapped capital.
“We estimate the value of US books in run-off, which could benefit from the Rhode Island legislation, to be as much as $100 billion,” said Niemczewski.

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