In our Survey, we explore the trends, challenges and opportunities in the legacy sector, drawing on insights from PwC colleagues from across the globe. We also consider how fluid and changing market conditions are impacting run-off, and explore how key topics such as ESG, IFRS17 and regulatory and tax developments may influence and alter the global legacy marketplace.
The pace of change in the run-off sector has been rapid, and the evolution that we have observed during the last decade has led to the run-off market fulfilling a crucial and increasingly well understood role in the insurance lifecycle. As we look ahead, it will be interesting to see how the market will continue to adapt and grow, and if our Survey respondents' collective forecasts come to pass.
We would like to thank everyone who responded to our Survey. Learn more about some of our key findings below.
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Market size
It is the first time we have estimated that global non-life run-off reserves are greater than US$1trillion. This reflects a US$53billion (6%) increase since our last Survey published in September 2022. While the North America region continues to dominate the global non-life run-off market with reserves of US$489bn and over 5% growth since the last Survey, the UK and Continental Europe markets have experienced an increase of nearly 8% in their combined reserves, now totalling US$344bn, up from US$319bn. Reserves across the rest of the world are estimated at US$181bn, nearly 18% of the overall total. Our estimate of the total run-off reserves in absolute terms continues to increase, primarily driven by inflation.
North America (US$bn) 2019
3640
US: 3480
Canada: 160
Excludes long term care businessEurope (US$bn) 2019
2920
UK and Ireland: 660
Nordic region: 140
Germany and Switzerland:1250
Eastern Europe: 90
France and Benelux countries: 460
Other Western Europe: 32
Rest of World (US$bn) 2019
1350
Asia: 1010
South America: 210
Australasia:130
Middle East: n/a*0
Africa: n/a*0
*Middle East not estimated in 2019*Africa was not estimated in 2019, 2021 and 2022Global deal activity
Overall, non-life run-off deals in 2023 were fewer in number but larger in size. Publicly disclosed deals numbered 30, with US$8.1bn of gross reserves transferred representing the same volume of liabilities as in 2022 but across fewer deals. North America led the market in 2022 in terms of the number of deals (27 deals), but saw a sharp drop in 2023 (12 deals), while the UK and Ireland saw an increase in estimated gross liabilities transacted totalling US$3.4bn across 13 deals (US$1.5bn in 2022 across 11 deals). There were 3 deals in Continental Europe, down from 8 in 2022, although both years estimated gross liabilities transacted remained unchanged at US$0.2bn. Nevertheless, North America remains a key target for acquirers, with 65% of Survey respondents expecting a greater volume of transactions there in the next two years, reflecting the large run-off reserves and the strong ties with US insurers.
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Respondents' views of how they think the relative number of run-off transactions will change in each territory over the next two year
Value creation
Boosting investor returns through maximising the value from a deal is a mainstay of the legacy sector and Survey respondents were clear that proactive claims management remains at the heart of value creation. It is interesting to note that our respondents viewed investment management and capital structuring as important components for value creation. Achieving a balance will be key to delivering exceptional results in an active, competitive, and buoyant market.
To help sellers understand the potential impact and advantages of a legacy transaction, PwC UK has developed a Capital Relief Calculator (CRC) which can supply a quick, resource-light, quantitative estimate of the capital benefit that could be achieved from transacting different segments of reserves, and help show which classes of business may be most capital intensive. Via an interactive user interface, it can estimate the proportion of capital that could be released if a portfolio of reserves is sold, thus providing an initial analysis of possible strategies to consider for legacy books of business.
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Respondents' views of which value creation levers they think are the most important in managing non-life run-off business
Appetite for liabilities
General Liability, Motor and Financial & Professional Liability are the top three lines of business that our Survey respondents think will be most active during 2024. The latter two placed outside the top three in our 2022 Survey, indicating the growing appetite for more diverse portfolios in the run-off market.
Percentage of which lines of business respondents think will attract the most interest in 2024
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“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 more than ever before is well placed to support the live market in achieving strategic priorities such as efficiently releasing and redeploying capital and securely carving out non core portfolios.”
Contact us
Rebecca Wilkinson
Corporate Liability Restructuring, PwC United Kingdom
Tel: +44 (0)7808 030283
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