“We expect Bermuda will continue to play a significant role in the growth and evolution of the legacy market due to the depth of talent and also its regulator,” suggests Matt Britten, Partner, Insurance, PwC Bermuda.
According to PwC, the global non-life run-off market remains active, with $9.4bn of estimated gross reserves transacted across 37 publicly announced deals in the 12-month period to the end of the first half of 2023.
Compared to the same period in 2022, PwC observed that the total deal value is almost identical. However, there were a third fewer announced deals. (37 deals in the 12 months to H1 2023 vs. 55 deals in the 12 months to H1 2022).
Further, Q1 of 2023 saw record deal activity, with a concentration of large deals involving LPT/ADC and RITC transactions, both at Lloyd’s and in the company market.
“This reflected a general shift towards demand for reinsurance-based capital relief solutions. The trend towards more reinsurance-based structures has seen some transition for a legacy market that has traditionally seen expertise in liability management as a core driver of value creation,” PwC explained.
The firm observed that while deal activity has slowed since the record Q1, it still expects a number of deals of varying sizes to be completed in the remainder of 2023.
“While the US and Lloyd’s markets will continue to be active, opportunities exist in Europe and Asia-Pacific, as well as in different classes of business, such as motor and transactions involving more recent underwriting years,” PwC added.
Matt Britten, Partner, Insurance, PwC Bermuda, who spoke at a PwC legacy market update session at the Rendez-vous de Septembre last week in Monte Carlo, commented, “We expect Bermuda will continue to play a significant role in the growth and evolution of the legacy market due to the depth of talent and also its regulator.
“The Bermuda Monetary Authority’s philosophy and approach have always provided a practical platform for insurers and reinsurers to innovate.”
Britten continued, “Looking ahead, I think we will see the legacy and prospective markets converge as deal motivations evolve and cedents continue to seek capital management solutions. With the trend in increasing deal size, we might also expect to see some level of partnering to get deals executed.
“There is also a growing appreciation by both cedents and legacy companies of the significant benefits of having the same regulator on both sides of a deal – and so we expect to see Bermuda’s role as the jurisdiction for cedents to consolidate their risk to grow. And finally, I expect to see a lot of competition for talent.”
Joseph Gordon, Director, PwC Bermuda, said, “Several acquirers have recently been focused on post-deal integration and value creation, investing in areas such as people, operational efficiency, and IT.
“As CEOs and COOs seek to match the development of their operations with the growth of both assets and liabilities under management, we’ve seen an increased focus on investment in IT infrastructure, including the consideration of AI tools.”