Legacy management sector considers opportunities offered by capital squeeze  

ARC reports positive 2008 and considers prospects for 2009

Commenting at its 2009 Congress, ARC, the UK trade body for legacy management professionals, today gave its annual sector overview.

Sector highlights:

• The downwards trend in UK run-off liabilities continued - total liabilities of the UK non-life run-off market fell to an estimated from £28.3bn at the end of 2007 from £32.7bn at the end of 2006¹


• Significant clarification of potential applications of solvent schemes of arrangement including:

  - Sanction of the EW Payne pool schemes. Probably the most complex to date – 82 participant companies were involved – its success paved the way for further large scale pool schemes
  - Sanction of the GLOBAL Re Scheme. The scheme broke new ground by being the first to centre on business that emanated from the UK, but which was written overseas

• Continued growth in the Continental European focus on tackling run-off liabilities - survey findings indicate 63% of insurers now class dealing with run-off as a priority for senior management²
• Greater focus on broker legacy issues as evidenced by acquisition by Citadel Risk Management of the majority of the reinsurance run-off portfolio of US broker, Arthur J Gallagher
• Greater ‘live’ market focus on capital release potential of run-off mechanisms - notable developments include $343m sale of Unionamerica legacy book by Travelers.

ARC highlights:

• Development of legacy sector ICAS model, Simulum 3, and launch at ARC Congress 2009
• Appointment of Paul Corver, Director of KMS (part of the Randall Group), as association chairman
• ARC Academy success further underpinned by growing interest from overseas delegates
• Third annual ARC Awards continue to underline sector innovation and excellence
• ARC tenth anniversary year – celebration programme raised £7,350 for charity

ARC chairman, Paul Corver, said: “The topics being covered at this year’s new look Congress – which has been structured to enhance the flexibility of networking opportunities for delegates while still delivering ARC’s annual update on key issues and developments – highlight the breadth of opportunities which currently exist in the legacy sector. From helping live underwriting operations release capital or ready themselves for Solvency II through to maximising reinsurance assets, the message is clear – ‘cash is king’ and legacy sector professionals have a wide range of valuable skills that could well be worth tapping into.

“Separately, the expertise and techniques which have been developed in London are not only making a real impact on the scale of run-off liabilities in the UK, but have also created a firm foundation on which an increasing number of Continental European players are looking to take action.”

Director of Education & Training for ARC, Bill Bower, added: “It is extremely gratifying to see how our courses continue to provide one of the key training resources for the sector. Our growing number of delegates from Continental Europe – as well as from all levels within the sector – reflect the value of the centre of excellence, in terms of good value and relevant training, that we have been able to develop with support from those in the industry. Similarly, the quality and quantity of entries for ARC’s 2008 Awards showed that this is an innovative and creative, as well as professional, sector. Such initiatives are all a critical part of promoting excellence in the sector.”

¹ The sixth KPMG Run-Off Survey of Non-Life Companies
² ‘Unlocking value in run-off’ – second annual PwC survey looking at European discontinued insurance business

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