Q1 2023 saw a number of super-sized non-life runoff transactions being announced continuing the trend observed in our 2022 year-end Deals review. 11 deals in total were disclosed in this period, whilst an estimated combined US$6.7bn of gross reserves was transferred to legacy market participants. This estimate represents a record high for any one quarter and equates to 83% of the total gross reserves transacted in publicly announced deals in the whole of 2022.
Of the deals announced in Q1 this year, notably three comprised the transfer of more than $1bn of reserves each, totalling $4.7bn in aggregate. The trend towards larger and more complex deals continues to be a consequence of sellers being highly motivated to release capital at scale and optimise opportunities and returns elsewhere in their business through strategic redeployment of the capital released. Furthermore, AM Best recently maintained its negative outlook on the UK’s non-life insurance sector citing rising claims costs stemming from high inflation, hardening reinsurance rates and the prolonged period of weak economic conditions as factors squeezing insurer margins. Such conditions are likely to contribute to ongoing deal supply into the run-off market. Also of note is that these three large deals in Q1 involved portfolios containing a wide variety of risks underwritten in major territories with two of the deals, involving Enstar / QBE and Compre / SiriusPoint, comprising both Lloyd’s and company market business in the same transaction.