The property/casualty run-off market can be seen as an attractive insurance exposed investment opportunity, according to a panel of run-off experts at a session at Convergence 2017, the annual insurance-linked securities (ILS) conference being held on Bermuda.
The panel included John Williams, co-founder, principal and president of Armour Group Holdings, James Ferris, director of PwC Bermuda and Bob Forness, chairman and CEO of Multistrat Holdings. It was moderated by Rachel Bardon, managing director of Hudson Structured Capital Management.
One area highlighted by the panel was the sheer size of the run-off market. According to the 2016 PwC European survey of the market, European non-life run-off business totalled €247 billion in value, which breaks down to €113 billion in Germany and Switzerland, €49 billion in the UK, €41 billion in France and Benelux, €10 billion in the Nordic region, €28 billion in other western Europe and €6 billion in Eastern Europe.
The panel stressed that investors did need to understand the risks involved, given the fact that run-off can be, by its very nature, quite long-term in nature, with both tail winds and headwinds coming from different directions, but that it can provide a long-term form of income.
The panel also pointed out that it was almost impossible for a catastrophe to affect the run-off market. In addition the market itself is highly regulated.
Ferris added the caveat that many run-off entities tend to have a higher average age for their workforce , which meant that a challenge for the future was the need to attract younger staff into them. However, Forness countered by stating that younger staff can be more expensive to train if they are starting off their careers in the sectors.
The panel agreed that claims handling, commutations and asset management created high barriers to entry, but that there was opportunity there for the ILS market, especially as Brexit might create additional opportunities for organisations on Bermuda to exploit in the UK or Europe.
ILS Convergence 2017, Run-off, Property, Casualty, Bermuda, Europe