Convergence of trends will result in growth of global run-off

The global re/insurance industry is facing a convergence of influences that will lead more players to consider run-off or the divestment of business as a strategic option, according to Steve Cernich, executive vice president of corporate development at Bermuda-based life insurance company Athene Holding.

Cernich was talking to delegates at the SZ (Süddeutsche Zeitung) conference, titled ‘Run-Off 2016: New Dynamic in the Market’, which took place in Hamburg, Germany, this week, were told.

He said that the 2008 financial crisis had created a catalyst for change in the industry due to low interest rates and pressures from investors for returns.

This has changed the market as foreign parent companies look to retrench and as a result insurers start to put blocks of business into run-off or look for exit strategies, Cernich said.

According to Cernich, not only is this trend continuing to accelerate in the US, but is also true in Germany and other areas of Europe, especially as domestic carriers look to reduce risks and focus on their core businesses and improve return on equity (RoE).

This could lead to structural changes in the insurance industry. As result, some of the bigger players in Germany could put blocks of business into run-off.

Cernich told attendees that a number of lessons had been learned, including getting the price right, getting diligence correct and on focusing on integration issues such as policyholder administration platforms, back off integration and aspects of corporate culture.

Other issues include the need for strong risk management, differentiated investment management, a long-term focus on policyholder protection and value and the ability to deliver consistent shareholder performance within the boundaries of the German accounting and value systems.