KPMG survey says arrangement mechanisms used to settle liabilities

UK non-life insurance liabilities in run-off increased 30% to around £37.4bn, according to KPMG’s recent annual survey.

The increase was driven primarily by the fall of sterling against the dollar, meaning run-off was more expensive for UK firms paying out in dollars. The survey also included business that had gone into run-off from monoline insurers, who insure against bonds defaulting.

KPMG restructuring partner John Wardrop said: “Depressed investment income due to low interest rates means companies in run-off are under pressure to make their businesses more efficient.”

The survey also shows that insurers are using the scheme of arrangement mechanism to settle run-off liabilities. Policyholders agree to nullify insurance policies in return for a cash payment.

As reported in Insurance Times, one of the most high-profile run-off arrangements happened earlier this year when HSBC put HSBC Insurance, formerly Corinthian Insurance, into run-off.