Global non-life run-off reserves are estimated to exceed US$1 trillion for the first time. After a few years of hard market conditions, business that has recently entered run-off is more profitable than that written in the soft market years of 2014 to 2018, implying a lower loss ratio compared with previous estimates.

With estimated global gross liabilities transacted in 2023 mirroring that of 2022, respondents to a PwC UK survey of non-life legacy insurance market participants expect the strong pipeline of global deals to continue in 2024 and beyond.

Survey respondents identified general liability, motor, and financial and professional liability as the top three most attractive lines of business. The latter two placed outside the top three in PwC’s 2022 survey, showing a growing appetite for younger exposures and more diverse portfolios in the run-off market.

Rebecca Wilkinson, corporate liability restructuring director, PwC UK, said: “The market has evolved significantly - from a focus on finality and removing underperforming business, to concentrating on capital relief and removing non-core lines of business. While we expect this to continue, many of the survey respondents we spoke to are confident that legacy activity will also be increasingly prompted by strategic restructuring. We see a scenario emerging where the legacy market becomes a facilitator for value-creation strategies if M&A activity picks back up in the live market.”

PwC UK’s global run-off estimate of US$1,014bn is based on insured liabilities only with corporate liabilities estimated at US$73bn, a US$5bn increase since the previous survey was published in September 2022. This estimate is specific to traditional long-tailed claims related to US asbestos, pollution and similar UK and European health hazards.


Run-off reserve highs (Source: PwC)

In 2023, there were 30 publicly announced non-life run-off transactions, with an estimated combined $8.1bn of gross reserves transferred to legacy market participants. The market had a record-breaking first quarter in 2023, which saw 11 deals involving three US$1bn plus sized transactions, followed by a quieter remainder of the year, with four, six and nine deals executed in each subsequent quarter, respectively.

Survey respondents were asked to identify what the top motivating factors for non-life run-off transactions were five years ago, are today, and what they might be in five years’ time. Capital relief was selected by only 10% of respondents for 2018, but was the most popular selection for both 2023 (34%) and 2028 (27%), highlighting the change in insurers’ perceptions of the role of the run-off market. The market is expected to continue to evolve, with strategic restructuring and capital relief predicted as the most popular motivating factors for non-life run-off transactions in 2028.

While PwC UK expects economic inflation to return to average pre-2019 levels by April 2024, there remains considerable uncertainty around the impact on claims inflation. As a result of insurers seeking ways to transfer this risk, run-off consolidators have been presented with new acquisition opportunities. Inclusion of inflation risk within a transaction’s risk premium is more important than ever, as inflationary impact was cited by survey respondents as one of the top three risks for a consolidator to consider when assuming a run-off portfolio.

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