Legacy Roundtable 2018

In the live market, many would argue there’s not a huge amount to be optimistic about at the moment. 

Despite hopes that a heavy cat year might dislocate the market and recalibrate the cycle, the market was still able to absorb $140bn of cat losses and barely flinch.

Rates have not reacted as they have done in the past, and the market is far from regaining the ground it lost during the many years of falling pricing and margin erosion. 

All the while, it’s becoming increasingly more expensive to do business. Legacy IT systems are perpetuating inefficiency and brokers are still pushing for even more commission, even though premiums are barely growing.

The days of double-digit returns in the live market are long gone. Carriers are being forced to take a long hard look at themselves and make tough decisions on addressing underperformance and cost base.

All in all, the live market currently has little to sing about.

Which is why moderating The Insurance Insider’s annual legacy roundtable was such a welcome reprieve from the misery.

Conversely, the run-off market could boast it is on the up. If one overarching theme could be extracted from our engaging discussion in Brighton, it is that positivity reigns in legacy circles.

Deals are getting bigger, and more frequent. Markets which were seemingly closed to the idea of selling their old liabilities are opening up, and are actively seeking discussions with run-off carriers.

Returns at legacy carriers are better than ever, and it’s caught the eye of private equity. New capital has come knocking and carriers are taking advantage – using this source of funding to grow in scale and bid for bigger deals.

Legacy carriers are becoming more sophisticated in their approach, as their clients demand it. Run-off solutions are becoming more tailored and more innovative. An impeccable reputation for efficient and professional claims handling is still a key priority, but run-off carriers are investing more than ever into technology and processing in order to be more competitive.

As one roundtable participant said, legacy has grown up – and the era of legacy 2.0 is under way.

That’s not to say there aren’t still challenges to be overcome. Run-off legislation in the US is being drawn up, but progress is slow and there are numerous creases to be ironed out.

Brexit is still an operational challenge for many UK and European run-off carriers, given the prevailing uncertainty around what a Brexit deal will look like.

However, even this can be perceived as having a silver lining – those who joined us at the roundtable said this could unlock a whole new wave of run-off liabilities, though, like Solvency II, they may be slow to actually come to market.

But now, the legacy market must make sure it treads carefully.

The live market knows the perils of taking on too much capital and pushing for too much growth, too quickly.

By learning from the live market’s mistakes, perhaps the run-off market can make sure it doesn’t lose its reason to be optimistic.

To view the Legacy Round Table Supplement 2018, please click here.

Enjoy the read!

Catrin Shi, News Editor, The Insurance Insider