Successful run-off is about working yourself out of a job apparently.
“There is nothing wrong if things come to a natural end and I do not see the need to perpetuate an industry just for the sake of it,” said our roundtable participant James Sion, vice president of global discontinued business at Allianz.
The London run-off market, it seems, has become a little bit too good at running off business. “Some of the names that are here now may not be here in a further two years,” predicted Helix UK director Mike Palmer.
Proactive management of existing run-off portfolios, absence of new run-offs and the weak US Dollar combined to bring non-life run-off liabilities in the UK down to £32.7bn at the end of 2006, a reduction of £5.5bn on £38.2bn at the end of 2005. This was the key finding of the 2007 KPMG/Association of Run-off Companies run-off survey.
Exit solutions are creating finality for old liabilities while stronger live companies means less new run-off is coming in to replace the old business. “If you imagine Katrina hitting the mid 1980s market, it would have created devastation and uncertainty, whereas the market has grown well and now has a grip on its losses,” explained roundtable participant Robin McCoy, chief operating officer of Randall & Quilter.
Perhaps surprising, Germany and Switzerland (42%) – not the UK and Ireland (25%) – have the greatest proportion of run-off liabilities in Europe (according to the PWC/ARC discontinued business survey).
So is the development of the European run-off market part of the natural evolution of things or has London become a victim of its own success? That is the question Global Reinsurance put to its panel of experts.
Helen Yates, Editor