Imminent introduction of Solvency II will act as a trigger for the legacy insurance market in mainland Europe.
The size of the non-life European run-off insurance market is estimated at €247bn, according to PwC. Of this, France and the Benelux countries account for around €41bn.
However, transactional activity in the sector has been relatively modest in continental Europe. Although the last six months have seen a noticeable increase in the number of deals in Germany, this has not been the case in France, in spite of the fact that French insurers and reinsurers hold a significant amount of liabilities in run-off on their balance sheets. These liabilities are mainly managed in-house, although we have seen some disposals recently.
We expect 2016 to be the year that this is set to change. With the arrival of Solvency II, many companies – especially medium or smaller insurers – will have to reconsider their business models in in light of the new regulations and assess what they mean for their business. The benefits of optimising the management of legacy business, or of organising the sale of certain books of business in run-off, will become more obvious in terms of capital requirements. This will translate into a greater focus on legacy business and an increase in the number of transactions in this field.