The European run-off market is experiencing a significant shift in focus explains Helen Yates

The European run-off market is experiencing a significant shift in focus. “It’s the capital providers coming in, it’s the PWC/ARC survey, it’s Solvency II, everything’s changing the focus,” summarised Richard Hayes, head of Cobalt Solutions UK. In our second European run-off roundtable, held in Cologne, Germany, we look at a run-off market that is becoming more about the active management of discontinued business than just an unwanted book of legacy business.

Once perceived as a very poor cousin to the established UK run-off market, Europe is fast catching up. According to this year’s PricewaterhouseCoopers survey, done in conjunction with the Association of Run-off Companies (ARC), discontinued business in Europe has exceeded ?204bn. Significantly; the German and Swiss markets had the largest exposure, with an estimated 41% of the market, worth more than ?84bn. The UK and Ireland accounted for just a 28% share (?57bn).

In addition, this year’s KPMG/ARC survey found that while the London run-off market had contracted by 14%, run-off globally will become a bigger business. “There will probably be growth in Continental Europe and Bermuda, and a constant flow of business from the US,” predicted John Byrne, CEO of AXA Liabilities Managers UK.

An important shift is clearly taking place. Europe is increasingly deemed a good market in which to run-off business, and portfolios are therefore no longer flooding to London with quite the same force. The cultural environment may be different in Europe, but the raw expertise and exit strategies exist. With new regulation coming in (including the Reinsurance Directive and Solvency II), the increasing involvement of capital market investors and a growing toolbox at their disposal, now is the European run-off market’s time to shine.