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French insurers will accelerate the disposal of portfolios in run off in 2021

  • Market Insight 09 December 2020 09 December 2020
  • Global

  • Insurance 2021 - the year ahead

In their 2019 annual Global Run Off Survey, PwC estimated that global non-life run-off reserves for France and the Benelux countries amounted to USD 46 billion.

The main drivers, according to respondents, were disposing of non-core business and releasing capital.

These objectives are now even more relevant. Indeed, re/insurers are facing significant strains on their operational resources while trying to anticipate the financial consequences of the COVID-19 pandemic. As Solvency II is now well implemented, the opportunity to release assets and reallocate capital to growing core business is a priority for all major re/insurers. Legislation and regulation are also becoming much more business-specific, making the allocation of specialised expertise essential for the management of all in-force business.

Consequently, exiting lines of business by disposing of portfolios and, sometimes, entire entities has become more attractive. The maturity of the run-off market and the experience of past transactions has shown that one of the main obstacles, i.e. reputational risk related to claims management, is now at the centre of legacy specialists' strategy. Disposing of a portfolio while preserving policyholders' or cedants' interests is now the standard which is changing the perception of such transactions. In addition, current market conditions allow well-managed portfolios to be competitively priced for the benefit of sellers.

France offers a reliable and well-tested process for portfolio transfers which provides a high level of finality at a fraction of the cost of similar schemes in other jurisdictions. In any case, various transitional or alternative options are available to ensure a smooth and reliable transition.

As such, we have seen a significant increase in transactions in 2020 and expect the trend to continue in 2021.

View all our Insurance 2021 predictions here


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