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Wuba subsidiary set for German run-off sale

A landmark run-off transaction expected to come to market next month is understood to involve a subsidiary of Wurttembergische und Badische Versicherungs-AG (Wuba), The Insurance Insider can reveal.

Deutsche Versicherungs- und Ruckversicherungs-AG (DARAG), which was bought along with its parent by American International Group (AIG) from associates of hedge fund JC Flowers & Co in August last year, is the unit up for sale, according to sources.

An information memorandum on the P&C portfolio, which has around EUR100mn in liabilities as well as licences to operate in Germany, is expected to be sent out around the middle of next month, with non-binding bids expected in September.

Around 25 parties are thought to have expressed interest in purchasing the portfolio.

Arndt Gossmann, who heads the German insurance solutions team at KPMG, which is advising on the transaction, would not comment on the identity of the portfolio.

However, speaking last week he said that the portfolio would be attractive because it would gain buyers a foothold in Germany.

“Having a team on the ground and a legal entity with a licence provides a truly local and well-connected entity in one of the most attractive markets,” he said.

Run-off practitioners are increasingly interested in building a local presence in Continental European hubs, in anticipation of more run-off business as a result of capital management initiatives ahead of the 2012 Solvency II regulation.

At the time of the Wuba and DARAG purchase, former AIG president and CEO Martin Sullivan said: “We are pleased to have reached an agreement to acquire Wuba and its subsidiaries. The transaction both reaffirms AIG’s commitment to growing in the German marketplace and greatly enhances our insurance offerings to small and medium-sized companies.”

DARAG refused to comment on the transaction.

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