Firm says M&A unlikely to be inhibited by Solvency II

Pensions Insight

European insurers are increasingly seeking to exit their run-off businesses, the latest survey by PwC has revealed.

PwC’s sixth survey, Discontinued Insurance Business in Europe, which came out yesterday, found that finality was the key objective for legacy insurance liabilities.

The report said that respondents were considering a range of options for exiting their run-off business.

The survey said outright disposals and solvent schemes of arrangement were the most commonly considered forms of exit.

PwC leader of the solutions for discontinued insurance run-off team Dan Schwarzmann said: “We are seeing increasing focus on legacy liabilities across Europe by large ongoing insurance organisations and, in particular, the exploration of exit options for portfolios which are no longer core to the business.

“This has led to a steady stream of exits over the past 12 months and we expect restructuring activity to continue across Europe in 2013.

“The extent of mergers and acquisitions activity in the run-off sector is unlikely to be inhibited by the delays to Solvency II’s implementation. The continued appetite of established run-off acquirers for transactions and the increasing attention on the sector by new sources of capital should result in a stream of deals in the next two years.

“We expect opt-out schemes to figure increasingly as owners of discontinued business across Europe look to proactively manage their legacy portfolios towards finality.”