Picking up the pace - Non-life insurance run-off deal activity Q3 update
October 15, 2018
Our quarterly update looks at the recent activity in the Non-life insurance run-off market and our thoughts on what is coming up next
As predicted, deal activity in the global non-life insurance run-off market has gathered pace in Q3 2018 with 11 deals publicly announced compared to just 4 in Q2. The total number of deals in 2018, to date at 22, remains ahead of the 2 year predictions of respondents to our Global Insurance Run-off Survey 2018. The range of deals we are seeing continues to demonstrate the variety of solutions in the market. During the quarter, deal types included acquisitions by strategic partners, ‘live with legacy’ deals, a novation of captive liabilities, Loss Portfolio Transfers (“LPTs”) and Insurance Business Transfers (“IBTs”). Earlier in the year, we noted muted transaction activity involving asbestos, pollution and health hazard (“APH”) liabilities, historically the bedrock of run-off deals. During Q3 however, two US APH books were transacted with a combined deals value of almost $250m showing that the appetite amongst run-off consolidators for acquiring and managing these types of exposures remains strong.
Even without a tested mechanism for IBTs in the USA, the USA market has remained strong with over $2bn of gross liabilities transacted so far in 2018, larger than the reported deals in the rest of the world combined. While this only includes publicly disclosed transactions, it is clear the USA is open for business in terms of run-off deals and a successful IBT mechanism will only spur this on further.
What are the Q3 2018 highlights?
- 11 deals announced
- 4 different deal types, including LPTs, IBTs, Share sales and novations
- $1.85bn gross liabilities transacted
What should you look out for in the next quarter?
- Oklahoma’s Insurance Business Transfer Act becomes effective on 1 November 2018 and the first IBT should not be far behind>
- 13 deals were publicly announced at the end of 2017 and the end of 2018 is likely to see a similar flurry of deals as companies seek to reach agreements before the year end.
- Scrutiny of underperforming lines at Lloyd’s picks up the pace, leading to exits and opportunities for run-off consolidators.
Want to discuss any of the findings from our analysis? Contact one of the team below.
About the run-off deals team
The non-life insurance run-off deals team has access to more than 200 specialists who can provide expert support throughout the deal lifecycle, including:
- Deal feasibility studies and strategic options analyses
- Transaction structuring advice
- Preparation of marketing materials and running of disposal process
- Bidder identification and deal negotiation support
- Actuarial support including Deal pricing, reserving and capital optimisation
- Post-transaction separation and migration advice
About the data
The data used in this publication has been sourced from company announcements and other publicly available information.