North America leads legacy market bounce-back: PwC analysis

Despite a turbulent 12 months, recent deal activity suggests the market for legacy transactions remains strong. New PwC analysis shows the North American market in particular has bounced back after a quiet 2023, in line with predictions in PwC’s March 2024 “Global Run-Off Survey”. 

The 13 North American deals involving over $3 billion of liabilities completed in the first eight months of 2024 already exceed the total number of deals announced in 2023. Future deal flow in the US could come from more adequately reserved liability lines such as professional lines, general liability and auto liability, which typically require less risk margin. 

By comparison, the UK market has remained quiet this year. In particular, the Lloyd's Reinsurance to Close (RITC) market has been quieter, possibly a natural correction after the considerable activity seen over the last couple of years, the report said.

“The sector has a spring in its step after the recent burst of activity.”

In the EU, there have been rising rates across liability lines including motor, but legacy players may still show caution towards portfolios of motor business given consistently worsening loss ratios, PwC said.

To date in 2024, 16 transactions have been publicly announced with most of the established acquirers having completed deals. The recent momentum early in the third quarter looks set to result in overall deal numbers in line with 2023’s. The largest and most established players have been the most active in 2024 to date, but a number of mid-tier players have now completed deals as well. The sector has been boosted by a significant investment in one of the largest players, which on completion will see only privately-owned and no remaining listed legacy businesses. 

The sector has a spring in its step after the recent burst of activity and a general view that the pipeline of legacy deals remains robust. However, any potential transactions coming to market that include reserves from the softest market years of 2016 to 2020 are likely to be treated with caution by legacy acquirers particularly in US casualty business which has continued to experience adverse development.

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