With estimated gross reserves of $9.4 billion transacted across 37 deals has been publicly announced in the 12 month period to the end of June 2023, the global non-life run-off market remains active, notes PwC.
When compared to the same period in the prior year, PwC notes that there’s an almost identical total deal value, but with only 37 transactions in the 12 months to H1 2023 compared with 55 deals for the prior year period, the number of deals has come down by a third.
According to PwC, Q1 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.
The firm says that this is a reflection of a general shift towards demand for reinsurance-based capital relief solutions.
This trend, says PwC, has seen some transition for a legacy market that has traditionally seen expertise in liability management as a main driver of value creation.
Andrew Ward, Liability Restructuring Partner, PwC UK, commented: “The larger deal sizes we’re seeing reflects trust in the market. While deal activity has slowed since the record first quarter as large deals have been digested, we expect a number of deals of varying sizes to complete in the remainder of 2023. The ongoing hard market, abundance of buyer capital and increased focus on deal generation by intermediaries means the legacy sector will continue to remain buoyant.
“The market has generally retained good pricing discipline, meaning deals have been left on the table – although we’re now seeing some of these deals returning to the market. While the US and Lloyd’s markets will continue to be active, opportunities exist in Europe and AsiaPac, as well as in different classes of business, such as motor and transactions involving more recent underwriting years. These all require differing approaches to risk assessment, due diligence and operational capability – challenging buyers to be flexible in their approach.”
PwC expects to see further evolution in the acquirer landscape, notably new entrants, consolidation, and also some possible exits from the market as business plans develop.
The company also notes that a number of 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. Many players are already seeing value in taking these steps both in their existing portfolios under management and in their deal processes. The investment in these areas is overdue but signifies the market is here for the long term,” said Ward.
