To coincide with this year's Association of Run-off Companies' annual seminar and commutations congress, this issue of Global Reinsurance takes a long and hard look at the run-off sector. There are many within the re/insurance sector who would prefer not to dwell too long on the legacy of the past, but the truth of the matter is that it is only by professional and businesslike management will the sins of the past market not be brought to bear overwhelmingly on the current and future opportunities.

Lloyd's successfully managed this with the formation of Equitas back in 1996, and although faint rumbles of uncertainty over its future status and relationship with Lloyd's occasionally surface, Equitas still remains a leading force in the run-off market. In fact, the sheer size of Equitas helped catalyse the practice of commutations, now a widely accepted - and frequently preferable - tool in the run-off kit.

International focus for run-off
Despite this London focus, run-off is increasingly becoming an international issue. One of the early proponents on the non-UK front was Wasa Insurance Run-Off Co Ltd, a subsidiary of Swedish insurer Lansforsakringar, which manages the run-off for its current parent and former (now merged) parent Wasa. As well as running off the portfolios of several former Lansforsakringar subsidiaries, including Wasa International, Wasa International Re, Stockholm Re Sweden and Stockholm Re London, it also administers the run-off of certain books for Lansforsakringar. Its success to date implies there is an internationalisation of the market, whether it be the overseas companies which took a stake in the London market, or purely down to the international nature of reinsurance business. In fact, delegates to this year's ARC Congress will be travelling from across Europe, including Belgium, France, Germany, Denmark, the Netherlands, Norway, Sweden, Finland and Ireland, and from the US.

Continuing trends
The growing run-off market is likely to continue blooming as the impact of deteriorating back year exposures, investment portfolio problems and WTC-related losses all persist in taking their toll. The demise of Gerling Global Re - the sixth largest reinsurer this time last year - indicates that even those which appear the strongest in the pack are not immune to the malaise of the market. For others, however, the dropping away of the competition is opening up business opportunities - at least for those which have the perceived strength and persistence to bear their current and back year loads. Converium, a paradox of a reinsurer in that it is simultaneously one of the oldest (through its former parent Zurich) and one of the newest (through its December 2001 IPO) in the sector, appears to be bearing its load. Although it strengthened its non-life reserves by $148.5m in the course of 2002, Converium's management remains stalwart in its view that the reinsurer is looking very fit for the future. With a cap on its World Trade Center-related losses courtesy of former parent Zurich Financial Services, and healthy profits emanating from several areas of its business - in particular aviation and space (not noted for stunning profits, at least in recent years), Converium is well-placed to take advantage of the current business opportunities in the sector, attests its senior management.

Where the Converium model is particularly notable is its drive towards becoming a global organisation. Many businesses now push this mantra, but it is rare that any truly attain the status. Brands such as Coca-Cola may be recognised and distributed around the world, but they still bear an identity inextricably tied in to their country of origin. Converium is attempting to eschew such a system, and create an organisation in which there is no perceived headquarters jurisdiction, or a perceived nationalistic corporate culture. "We want a global culture, not a local culture," said Martin Kauer, Group Chief Financial Officer at Converium Ltd. Currently, so-called players in other parts of the global financial services market are unable to deliver the types of systems that Converium would need to put its dream into place, but the very fact the reinsurer is championing such a structure can but help to advance the cause.

It could, of course, be argued that reinsurance is already the most global of the financial services businesses. Risks emanating from almost every corner of the globe find their way into the marketplace, and eventually are spread among reinsurers situated around the world. But ultimately the risk-bearers are seen as belonging to one jurisdiction or another - the US, London or Bermuda, for example. Perhaps the falling away of these geographic fetters could be the key to the next stage in development of the industry.

By Sarah Goddard
Sarah Goddard is the editor of Global Reinsurance.