Has the traditional focus on London as a centre for run-off been at the expense of up-and-coming Nordic countries? Johan Lagerwall thinks so.
On his first day at school a young boy was asked what his father did for a living. The boy, whose father worked for a European reinsurance company that had been in run-off for some years, said: “My father travels around the globe selling insurance; then he comes home; then he travels round the world again, this time buying back the insurance at a cheaper price.” This is an excellent description of how the real run-off market works.
Ever since its early days, London has been the centre of the insurance and reinsurance world. First came Lloyd's and then the company market, and both flourished until the late 1980s, when large spiral losses developed within the market. Syndicates at Lloyd's that had always believed they would never become insolvent were shaken to their very foundations. Then came the idea to form the huge run-off company Equitas, and for the first time some of the ongoing syndicates at Lloyd's had corporate rather than private investors.
But London was not the first place to develop active run-off through commutations in the early 1990s, it was companies in the Nordic countries that first took this forward. These companies had been writing business from the London market for many years whilst at the same time founding subsidiaries in London, effectively underwriting the same risks.
To a large extent, companies in the Nordic region chose to handle their run-off internally, which they have done with great success. Excellent examples are Oslo Re (Storebrand International) in Norway; Wasa Run-Off (Stockholm Re/Wasa International) in Sweden; and more recently Copenhagen Re in Denmark.
The Nordic companies have much to offer to both continental Europe and London when it comes to run-off expertise. A very good example is Wasa Run-Off in Sweden, which was the first company to transfer a portfolio from a UK company into a Swedish company under the new EU rules, and now also provides advice to Luap (Folksam International in liquidation) in London. Perhaps the London market should follow the example of the English Football Association and employ a Swedish viking – he did a very good job for the England team.
In London, run-off providers cooperate through their organisation (ARC); and in France a new run-off organisation (SEGS) has been founded. Surely it is time for the creation of a European run-off organisation that will develop the European run-off market and work alongside ARC and SEGS.