External forces are shaking up the UK non-life insurance run-off market

External forces are shaking up the UK non-life in...

KPMG’s annual ‘Run-off survey’ of UK non-life insurance, has shown that liabilities have reduced again in 2010 but at a slower pace than in the past...

Also on KPMG.com

Press Release
  • Traditional London Market run-off is in slow decline  
  • Decrease in value of total run-off liabilities by 9%  
  • Solvency II is placing considerable demands on valuable resources    

KPMG’s annual ‘Run-off survey’ of UK non-life insurance, has shown that liabilities have reduced again in 2010 but at a slower pace than in the past.  

Mike Walker, Head of KPMG’s Restructuring Insurance Solutions Practice at KPMG in the UK, commented: "A large proportion of the remaining solvent run-off market outside of Lloyd’s now resides in the hands of entities whose business approach is not to accelerate claims; through choice or because those claims are insured through compulsory insurance. These businesses currently face potentially difficult challenges as they seek to generate profits and release surplus capital at a time of increasing costs, claims settlements and depressed investment performance."  

“Significant time and valuable resources are being used to deal with increasing compliance burdens required as a result of the changing regulatory environment. Despite recent announcements regarding the proposed delay to the implementation of the Solvency II directive, there is little respite for insurers."  

“Proposed new transitional exemptions for run-off companies, who have argued that the costs of Solvency II are disproportionate for their businesses, will clearly be welcomed. To benefit from these arrangements however, run-off business will need to close within a limited timeframe and we are likely to see run-off entities revisiting schemes of arrangements and other finality options.”  

Key findings of the research include:  

  • Total liabilities of the UK non-life run-off market decreased by approximately nine percent to an estimated £27.1 billion in 2010 (equating to 13 percent of the non-life market as a whole), down from £29.7 billion in 2009;
  • The decrease in the value of liabilities is primarily a result of two factors: (i) the elimination of syndicates at Lloyd’s with open years through the Reinsurance to Close process; and (ii) the release of reserves following claims settlements, commutations and/or favourable claims development; and
  • Total capital tied-up in solvent UK non-life companies in run-off decreased by approximately £0.3 billion to £3.9 billion; principally due to successful extraction of surplus capital through capital reduction, dividend distribution and other mechanisms.

The survey also shows that Solvency II remains a high priority for the insurance sector including the run-off market, which may in turn drive M&A activity and further consolidation.

John Wardrop, Partner in KPMG’s Restructuring Insurance Solutions Practice, commented: “In the last 18 months we have seen, and have advised on, a number of large scale reorganisation and restructuring projects by many of the largest insurance groups as they seek to minimise future administration and compliance costs, and maximise capital efficiencies ahead of Solvency II. We anticipate such structuring projects for insurance groups may lead to some legacy business ending up in the hands of run-off acquirers.”   

– ENDS –  

For further information please contact

Monica Fiumara, Senior PR Manager, KPMG

T: +44 (0)20 7694 5674

M: +44 (0)7901 105180

E: monica.fiumara@kpmg.co.uk

About KPMG

KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with nearly 11,000 partners and staff. The UK firm recorded a turnover of £1.6 billion in the year ended September 2010. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 150 countries and have more than 138,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

Connect with us


Request for proposal



KPMG’s new-look website

KPMG’s new-look website