Overview
Trends and challenges in US run-off market management
In 2004, PricewaterhouseCoopers LLP (PwC) published a first-of-its-kind survey of the run-off market, primarily focusing on run-off insurers operating in the UK. The survey shed light on working practices within the industry’s most mature market for discontinued insurance liabilities. Since the survey’s publication, the UK market has continued to mature and explore innovative techniques designed to preserve and extract value from discontinued liabilities.
In contrast, much less information is known about the run-off market in the US. Although the US market is generally acknowledged as the largest in the world, with estimated liabilities of $150 to $200 billion, run-off as a standalone business is less mature.
Recent numerous high-profile exits from the US underwriting market have put a spotlight on run-off liabilities. The number of exits appears to be based on the realization that companies must take a proactive approach to run-off liabilities to preserve value for all stakeholders.
To gain a better understanding of the current trends in US run-off management, PwC’s Insurance Restructuring Group distributed a survey in August and September 2006 to a group comprised mostly of property and casualty insurance and reinsurance companies with discontinued insurance operations across the US. The companies invited to respond included entities solely in run-off, as well as major ongoing companies known to have significant portfolios of discontinued business. The questions were focused on their profile/background, run-off management and strategy, regulatory issues, claims and claims strategy, ceded reinsurance, and IT systems.
The survey identified trends in US run-off market management, as well as the key challenges to the success of such management. While the survey results were not intended to recommend the optimal way to manage a run-off, they did identify common themes among the survey participants.
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