According to reports from Keefe, Bruyette & Woods (KBW), industry executives are optimistic about the prospects for the run-off reinsurance market, which they say should benefit from rising pricing trends.
KBW recently hosted a series of meetings with Florida and Bermuda re/insurance executives about their outlook on various sectors of the market.
One of the key takeaways was a positive view on the $1 trillion run-off market, which execs believe will see a boost as rate increases prompt many incumbent carriers to offset the low returns and inevitable distraction inherent in legacy reserves.
One executive told KBW that the characteristic underinvestment in non-core lines’ reserves can itself exacerbate underperformance that makes retroactive reinsurance (managed by active, focused, and experienced product line specialists less likely to passively allow mounting outside counsel costs) even more attractive.
While past runoff portfolios frequently centered on older policies legacy transactions often involve claims relating to the immediately preceding accident-year.
KBW also expects concerns about social inflation to boost the demand for loss portfolio transfers (LPTs) and other retroactive solutions.