As per research conducted by PwC UK, global non-life run-off reserves are estimated to have reached $1.014 trillion, marking a $53 billion increase since its last survey published in September of 2022.
Respondents to PwC UK’s recent survey of non-life legacy insurance market participants expect the strong pipeline of global deals to continue in 2024 and beyond, with General Liability, Motor and Financial & Professional Liability pegged as the top three most attractive lines of business.
“After a few years of hard market conditions across geographies and lines of business, PwC UK expects business that has recently entered run-off to be more profitable than business written during the softer years between 2014 to 2018, implying a lower loss ratio compared to previous estimates,” the firm said.
PwC UK also anticipates economic inflation to return to average pre-2019 levels by April 2024, however, there remains “considerable uncertainty” around the impact on claims inflation.
Looking at 2023, there was reportedly a total of 30 publicly announced non-life run-off transactions, with an estimated combined $8.1 billion of gross reserves transferred to legacy market participants.
PwC explained that the market had a record-breaking first quarter in 2023, which saw 11 deals involving three $1 billion plus-sized transactions, followed by a quieter remainder of the year, with four, six and nine deals executed in each subsequent quarter, respectively.
“Although PwC UK’s recorded deal volume statistics show a decline in market activity, the legacy market continued to demonstrate its global reach and diversity in 2023, with deals completed across multiple jurisdictions, involving various deal structures such as RITCs, LPTs, ADCs, novations and share purchases,” PwC UK noted.
The firm continued, “The significant activity within Lloyd’s of London in Q1 2023, which tailed off in the following months, resulted in over a third of total deals in the year involving Lloyd’s liabilities.”
Rebecca Wilkinson, Corporate Liability Restructuring Director, PwC UK, commented, “The market has evolved significantly – from a focus on finality and removing underperforming business, to concentrating on capital relief and removing non-core lines of business.
“While we expect this to continue, many of the survey respondents we spoke to are confident that legacy activity will also be increasingly prompted by strategic restructuring. We see a scenario emerging where the legacy market becomes a facilitator for value-creation strategies if M&A activity picks back up in the live market.”
Andy Ward, Corporate Liability Restructuring Partner, PwC UK, concluded, “The Legacy Market continues to evolve. While deal numbers have reduced compared to prior years the same volume of liabilities have been transacted year on year, clearly illustrating a trend towards increased deal sizes.
“There is greater separation in the market as it matures and acquirers increasingly focus on their sweet spots ranging from deal size to liability type.
“We remain convinced that the market will continue its development and is better placed than ever before to support the live market in achieving strategic priorities such as efficiently releasing and redeploying capital and securely carving out non-core portfolios.”
