Discontinued insurance business in Europe has exceeded €204bn, according to a new survey by PricewaterhouseCoopers in conjunction with the Association of Run-off Companies.
The research, the first of its kind to estimate the size of the European run-off market, also highlighted the significant costs associated with discontinued insurance business to European insurers – around €5bn every year.
The survey examined the challenges of managing run-off business across Europe. It showed that German and Swiss insurers have the largest exposure, with an estimated 41% of the market worth more than €84bn, with UK and Ireland standing at 28% (€57bn).
Dan Schwarzmann, partner in the Solutions for Discontinued Insurance Business practice at PricewaterhouseCoopers, said: “To date the London market has been the most proactive in recognising the issues associated with run-off business and creating solutions which release value for the insurers as well as policyholders and cedants alike.
“However, this is now beginning to change as insurers in the rest of Europe recognise that they can no longer ignore their discontinued business.
"This is as a result of issues like Solvency II and the capital that will be required to support run-off liabilities as well as the management distraction and costs associated with dealing with these portfolios on a day-to-day basis.”
The survey revealed adverse loss development owing to asbestos, pollution and health hazard claims, reinsurer identification and default, IT support and loss of staff knowledge as some of the most significant challenges.
