Capital relief transactions shift focus to strategic tail risk management
Legacy market ready to get into the habit of repeatable transactions
US carriers present significant growth potential for legacy market, says Acrisure Re's Ryland
By Michael Jones
May 13 - (The Insurer) - The legacy market is positioned for growth with greater product innovation and increased scale suggesting the sector could double in size over the next decade, an Insurance & Reinsurance Legacy Association (IRLA) panel said on Monday.
During the panel, which took place at IRLA's annual conference in Brighton, Enstar EU CEO Nick Crossley said the legacy market had embedded itself in the global value chain due to the pace of its innovation, the broadening of its risk appetite and its growing scale.
Multiple panellists said conversations with clients have shifted towards capital relief transactions aimed at releasing and recycling carrier capital to promote growth.
"Five, six years ago, there was still probably an element of discontinued restructuring that led the way. Now almost every insurance company we talk to is thinking strategically about how they manage tail risk and how they release capital supporting reserve risk and place it at the forefront of underwriting," said Compre CEO Will Bridger.
IRLA chairman and EY partner Kevin Gill told The Insurer that this shift towards capital relief meant there was scope for live carriers to tap the legacy market for repeatable transactions every year.
Gill said the regular release of non-discontinued medium- to long-tail liabilities presented a huge growth opportunity for the legacy market.
"You could see, to some extent, almost a market doubling in 10 years' time, just in size. Because people get into this refresh, recycle of the capital," Gill said.
Steve Ryland, global head of legacy at Acrisure Re, said the increase in legacy market opportunities was also due to Lloyd's utilising the space effectively, with more than 70% of syndicates having engaged with the market.
Ryland pointed towards the 7,000 carriers in the U.S., excluding captives, as a source of "huge potential growth" for the run-off space. He said these carriers have a varying knowledge of the legacy market, with only the top 50 using it in a sophisticated way.
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