As we move into the second half of 2025 and start casting a cautious eye toward 2026, the legacy and run-off re/insurance market continues to play an increasingly pivotal role in the broader insurance ecosystem. No longer viewed as a quiet corner of the industry, the legacy sector is now a dynamic space where balance sheet optimisation, capital efficiency, and operational simplification are converging in sophisticated and often innovative ways.
What we’re witnessing is a maturing market, characterised by orderly deal flow, deepening specialisation, and a growing recognition of the long-term value legacy solutions can offer, beyond distressed scenarios, but as a proactive component of corporate strategy.
A Solid Start to 2025
H1 2025 saw a steady stream of legacy transactions across Europe and the UK, underscoring the enduring demand for liability portfolio offloading and finality solutions. DARAG’s acquisition of wefox Insurance AG’s run-off portfolio in Germany, Italy and Switzerland was one of several notable transactions. This deal followed wefox’s strategic divestment of non-core operations and marked a significant restructuring milestone for the insurer, illustrating how legacy transactions can act as enablers of broader business transformation.
Likewise, DARAG’s UK-focused loss portfolio transfer with Soteria Insurance Ltd., which involves commercial lines policies in run-off, is emblematic of a healthy legacy market in the UK. Notably, this transaction is structured with a subsequent Part VII transfer, reinforcing the importance of regulatory foresight and robust planning in legacy deals.
Across both deals, we see not just the removal of liabilities, but also the freeing up of capital, resources, and strategic bandwidth. It’s not about winding down, it’s about moving forward.
Crossroads of Innovation and Complexity
While traditional run-off and loss portfolio transfer (LPT) deals continue to underpin the market, there’s an increasingly innovative edge forming at the intersection of legacy and alternative capital. Recent ILS-based legacy transactions in Bermuda are quietly reshaping perceptions of what legacy can mean in the capital markets context.
By offering finality for trapped capital in property ILS portfolios, these deals are unlocking new types of value for investors and reinsurers alike. However, adoption remains niche for now. Appetite for these structures is still constrained by long investment horizons and the inherently forensic nature of legacy transactions, which makes it difficult to match them to the return expectations of most ILS investors.
Nevertheless, the convergence of ILS and legacy is a trend worth watching. It suggests that market participants are willing to explore increasingly bespoke solutions to address long-tail risks.
An Orderly Market with Headroom to Grow
Looking ahead to H2 2025 and into early 2026, we expect continued activity in Europe and the UK, particularly among mid-sized carriers looking to divest non-core portfolios or streamline historical liabilities. The market has matured considerably over the past five years, and today’s transactions are characterised by pragmatism, commercial logic, and regulatory rigour.
That said, we should not mistake a stable outlook for a simple one. Every run-off transaction presents its own complexities, whether it’s cross-border regulatory challenges, data quality issues, or legacy systems that require unpicking. The need for experienced counterparties and advisors remains paramount, particularly as deal sizes become more substantial and execution timelines more compressed.
In parallel, the growing focus on ESG and corporate governance is prompting insurers to look more closely at how they manage their legacy liabilities from a capital or solvency perspective as well as a reputational and operational standpoint as well.
What to Expect in 2026
Looking ahead, the outlook for 2026 remains fundamentally positive. We anticipate that legacy will continue to be used as a proactive strategic tool rather than just a back-end fix. There are three broad areas to watch:
- Further integration of legacy and capital solutions – We’re likely to see more experimentation at the intersection of ILS, captives, and run-off, especially in Bermuda and Cayman where structural flexibility allows for innovation.
- Continued focus on operational efficiency – As insurers aim to do more with less, legacy portfolio sales and run-off deals will remain attractive routes to simplification and capital redeployment.
- Increased scrutiny on capital management and loss fund efficiency – With pressure on returns and regulatory expectations on the rise, “hidden capital” in loss funds will likely become a more visible part of insurers’ optimisation playbooks.
Ultimately, the legacy market has evolved far beyond its historical image as a niche clean-up service. It is now an essential tool in the modern insurer’s toolkit, whether the goal is to restructure, exit, simplify, or redeploy.
As long as carriers continue to manage long-tail exposures and face capital efficiency demands, the need for high-quality, strategic legacy solutions will remain constant. The challenge for the market will be to continue evolving at the same pace as the problems it aims to solve.
