Dear friends,
In April this year the London legacy market once again descended upon the coastal resort of Brighton for the annual Insurance & Reinsurance Legacy Association conference, and it proved to be a decidedly appropriate setting in all its nostalgic and fading opulence.
The legacy of the Victorian era - from the Royal Pavilion and the Palace Pier to the Grand Hotel - still lingers, a reminder of Brighton's boom period sparked by the construction of the railway line to London.
Like the seaside town, the run-off market itself is awaiting a new Golden Age as the last of its mainstay of traditional asbestos, pollution and health liabilities slowly ebbs away.
The sale of Zurich Insurance's UK legacy book Eagle Star last year was perhaps the signal of the end of an era for the London market.
And yet a second coming is surely in the pipeline - albeit a more difficult one to source.
The increasingly fragmented nature of market means legacy firms will have to search for potential business embedded in run-off portfolios in large groups rather than finding it in whole companies.
Meanwhile, in the US the impending auction of American Safety Insurance, with both live and legacy players in the bidding race, marks a rise in the "buy-to-kill" trend where renewal rights are sold on while the rest is run off.
Mirroring the Brighton-London connection, the legacy market has always been an offshoot of the live (re)insurance market, an alternative scene that was historically quite self-contained.
However in this new state of flux, the two markets have become more closely intertwined as run-off players not only search for business locked up in live players but also look to diversify into service provision to support the live sector in managing down liabilities.
Looking out from the Palace Pier and away from the London market, are the promised opportunities still to come from across the Channel?
Darag's recent purchase of German (re)insurer Hanseatica and the estimated EUR100bn run-off market in the German-speaking countries alone are proof that the European mainland is as yet relatively untapped.
And although the fruits of Solvency II are yet to materialise, the directive has already encouraged firms to start taking a fresh look at capital management and efficiency.
This can only benefit the run-off market in the long term as companies seek to consolidate or externalise run-off.
New capital flooding into the insurance market from the private equity and hedge fund world could also be fortuitous for the legacy sector as they seek quick exit strategies.
With these multiple potential silver linings ripe for debate, perhaps IRLA chairman Paul Corver was correct in his proclamation that "The Golden Age has yet to arrive!"
Enjoy the read,
Karina Whalley
Reporter,
The Insurance Insider
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