Arndt Gossmann, the founder and owner of Gossmann & Cie, has announced the establishment of Expiring Policy Roll-Over (working title), a product that, with Munich Re as a reinsurance partner, allows the ongoing transfer of insurance contracts expiring in the future to an external risk carrier.
This enables insurers to release equity by directly neutralising in their balance sheets all business that will no longer generate revenue in the future.
Interestingly, the product takes into account existing outstanding claims reserves as well as prospective risks.
“We want to offer insurers an opportunity to optimise their portfolios long before entire portfolios accumulate for run-off,” explained Arndt Gossmann, founder and owner of Gossmann & Cie., whose risk carrier will assume the policies in future.
“With our innovative ExPRO approach, such a roll-over of expiring policies will soon not only be easier and quicker, but also more cost-efficient than the sale of legacy portfolios practised to date.”
Gossmann estimates the volume of such expiring policies at around 4% of the insurance business, which corresponds to a market potential of more than €10 billion per year in Europe.
The firm, supported by mathematicians and structuring experts from Munich Re, has reportedly been working on the concept of transferring expiring insurance policies to an external specialist insurer for several months.
“Together with Munich Re’s experts, we have now succeeded in developing a mathematical procedure that uses methods of complex data analysis to extrapolate future loss experience,” added Gossmann.
“For the first time, terminated or no longer renewed policies can be transferred to a third-party insurer on an ongoing basis and at a fixed price agreed in advance.”
With ExPRO, the ceding insurer can release the capital and operational resources tied up by the ex-client immediately after the termination of a client relationship.
For an insurer, this is an uncomplicated and discreet instrument to focus the use of capital on active client relationships and future growth.
The ExPRO solutions are to be offered from the second quarter of 2019 by a new risk carrier headed by Arndt Gossmann.
Munich Re will accompany the transactions as a strategic partner and assume the majority of the risks as reinsurance partner. The specialist insurer will operate throughout Europe.
Initially, the focus will be on the German, Austrian, Swiss, French and Italian markets. Expansion to other countries is also planned in the medium term, while the management team will be introduced in March 2019.
“We have pitched the idea to selected insurance directors in recent months and have met with lively interest,” commented Gossmann. “We expect a dynamic course of business as soon as the product is launched in the second quarter of 2019.”