Non-life firms realising capital benefits from running off books is driving deals globally worth $8.1bn last year, according to PwC's annual review of transactions.
The advisory firm said previously catalysts run-off deals had included Solvency II and Lloyd's "Decile 10" performance-based winnowing. But the heightened role of optimising capital, particularly in hard markets, is likely to encourage further run-off deals, PwC said.
While PwC said fallout from January's reinsurance renewals remain to be seen, it expects one consequence of crimped reinsurance capacity will be sharper contraction in underwriting plans "which may even flow into exits at the primary insurer level [which] should logically lead to greater deal flow for the legacy market as carriers will start to explore what to do with closed lines which will prove to be a drain on capital and resources".
PwC mooted the possibility also of environmental, social and governance precepts driving deals in 2023 as insurers continue "refining their journey towards net zero and social responsibility".
Most ($6.4bn) of the $8.1bn of gross liabilities transferred last year were in the 26 North American deals, while the UK's and Ireland's 11 involved $1.5bn of gross liabilities, and continental Europe's eight deals shared $200m.
Overall 16 acquirers were involved in the 48 deals publicly announced. By volume, the largest share of transactions (42%) was in loss portfolio transfers, whereas by type of firm reinsurers did most (62%) volume.
About one-third of deal volume was in property and casualty lines (34%), followed by general liability (15%) and workers compensation (9%).
PwC said there were fewer deals in 2022 (48) compared with 2021 (54) and 2020 (53), but last year included enormous transfers, such as Enstar's $3bn deal with Aspen, and many by Lloyd's syndicates.
PwC said buyers had "retained pricing discipline" in uncertain times, and "detailed due diligence has likely contributed to some transactions remaining on the shelf".
The advisory firm says sellers and brokers will improve data quality this year to give acquirers "the best chance to price accurately and competitively".
Insurance Risk Data analysed the premiums and claims data from 2021 of 1,857 EEA undertakings, to identify which lines of business – life and non-life – might be in run-off, or at least in hibernation that year.
Across 12 non-life lines, underwriters recorded paying out in 6,537 cases, but in 711 of those instances they recorded receiving no gross direct premiums - not a definitive marker of decommissioned portfolios, but one possible signal of it. The net claims involved amounted to €37bn.
Across six life lines, the same sample of undertakings recorded paying out in 2,465 cases, but receiving no premiums in, in 400 of those cases.
Insurance Risk Data, the insurance data and research service of the publishers of InsuranceERM, contains data on premiums, claims and expenses, by line of business, for all EEA insurance undertakings and groups back to 2016, and analyses this in graphics on numerous dashboards for subscribers. For further details on the commercial value of this, contact [email protected]