ARC reports strong 2007 and flags potential developments for 2008

ARC has given its annual sector overview at the 2008 ARC Congress.

There are the first signs of a downwards turn in UK run-off liabilities - total liabilities of the UK non-life run-off market, including business written at Lloyd’s, declined from £38.2bn at the end of 2005 to £32.7bn at the end of 2006.

There has been a significant increase in the use of the UK’s Part VII Transfer mechanism. And the first cross-border reinsurance business transfer under new European Reinsurance Directive legislation was completed between Germany & UK

ARC chairman, Philip Grant, said: “The topics being covered by this year’s Congress seminar – which range from legacy sector lessons for live underwriting operations and the market for non distressed run-off business through to Solvency II and the emerging markets overseas - reflect both current and future opportunities for the sector.

“It is very encouraging to see how the expertise and techniques which have been developed in London are now making a real impact on the scale of run-off liabilities in the UK. The legacy management sector has developed as a centre of excellence for a wide range of skills including credit control and claims management as well as commutations negotiations and other closure tools. The FSA seems genuinely keen to understand the dynamics of claims handling practice in the legacy sector and ARC, which is eagerly looking forward to the review’s outcome, will facilitate the process in any way it can.

“The challenge now is to see how those skills can be applied in other areas – whether by using such techniques to release capital supporting the prior year liabilities of live underwriting operations, by helping the broker sector tackle its own legacy business or by supporting the current focus on reorganising and closing off run-off portfolios among key players in Continental Europe.”