The European insurance run-off market grew by 7bn euro this year and will continue to grow as Solvency II drives deals, a PwC survey claimed today.
Its annual survey on discontinued insurance business revealed that the European run-off market was now worth 242bn euro, up from 235bn euro in 2013. Based on the responses of 200 organisations, PwC found that a majority of this increase came from German and Swiss run-off books.
The consultants' Unlocking value in run-off survey predicted that run-off transactions would peak during the coming year as Solvency II drove a renewed focus in core business and led to organisations deciding to exit non-core lines. Also, two thirds of the organisations surveyed said they would increase their focus on dealing with underperforming lines of business due to Solvency II.
Dan Schwarzmann, head of PwC's solutions for discontinued insurance business, said: 'It has been another busy year in the insurance run-off sector and we expect this activity to continue. The market has grown to 242bn this year and we expect it to grow further as a result of the impact of Solvency II.
'There is likely to be a steady flow of companies attempting to dispose of, or exit from, legacy business that will not be capital effective in their post Solvency II balance sheets.'
Of the companies who have considered an exit for their run-off, nearly 60% have considered a sale, found PwC. The UK and Germany are expected to be the most active territories for disposal transactions in the coming years.
The survey highlighted that over 8 in 10 (80%) of respondents anticipated five or more disposals to occur in the next two years. Likely portfolio sizes to be disposed of would be less than 100m euro, found PwC.
Schwarzmann added: 'Our survey also highlights that balancing reputation with the desire for exit remains a key concern amongst continental European insurers.
'Despite the positive outlook for deals activity in the market the survey highlights that there remains some unease about how regulators across Europe will treat exit activity. The stakeholders in the run-off industry need to continue to work together to provide policyholders with optimum benefits.'
