The volatile and unpredictable insurance market conditions derived from the impacts of the COVID-19 pandemic, as well as emerging cyber, political, and environmental risks, has seen an increase in activity surrounding captives entering legacy transactions.
Increasingly recognised as a strategic portfolio management tool, exit solutions help to free up capital and capacity to allow captives to take on more risks for the parent company.
A segment report by A.M. Best notes that both demand and supply-side factors are driving high levels of activity in the nonlife legacy insurance market, including the hardening market conditions, demand for greater capital and operational efficiencies, and an influx of capital deployed into run-off consolidators.
Carolyn Fahey, executive director of the Association of Insurance and Reinsurance Run-Off Companies (AIRROC), summarises: “The legacy landscape is growing and thriving. Legacy business represents a significant pillar of the global property and casualty industry, as finality solutions allow insurance entities to redeploy risk-bearing capital toward new underwriting initiatives and growth segments.”