28 February 2005
INSURANCE DAY
INSURANCE DAY
(Spring 2008) Time to reconsider reinsurance(Oct 2007) High court sanctions Ruxley acquisition of Generali unit(Oct 2007) Ruxley in landmark reinsurance-funded acquisition(Apr 2007) Ruxley in Generali run-off talks(Autumn 2006) Part VII business transfers - adding flexibility to the run-off equation(Spring 2006) Why we need a scheme monitor(Spring 2006) BAIC and after(Feb 2006) Solvent Schemes of Arrangement Conference(Nov 2005) Scheming for solvency(Oct 2005) A wake-up call(Sept 2005) Time To Wake Up(Sept 2005) Free Audio Conference: Rating the Raters(Aug/Sept 2005) Air Your Views(Aug 2005) Ruling could curtail solvent runoff schemes(March 2005) Tackling The Pools(Spring 2005) Selling like hot cakes(Spring 2005) The scheming solution(28/02/05) Influx of capital can impact premiums(Feb 05) Bringing finality to underwriting pools(Winter 04) Dangerous waters(04/11/04) Solvent schemes offer real boost(01/09/04) Buying Run-off(05/07/04) Run-off moves to another level(03/02/04) Run-off on a positive note(2004) 2003 A year of innovation(Winter 03) Ruxley buys Aviation & General(06/10/03) Ruxley takes whole of A&G(04/07/03) End of asbestos saga?(03/07/03) Ruxley closes APH book(Summer 03) Vulture Culture?
He says the market has changed significantly since the formation of Ruxley more than three years ago. Since its first acquisition - of City General in December 2001 - the company has continued to purchase insurers and reinsurers in run-off and Mr Winter says awareness of run-off has greatly increased in this period.
"This is a good thing because in our view one of the keys to any successful runoff is the early contact with policyholders to explain the issues and our solutions," he explains. "We will look to provide finality in a short space of time via a scheme of arrangement. However, to put a scheme of arrangement into place you need the support of the policyholders.
"Three years ago policyholders on the whole would not have known what a scheme of arrangement was. While they may know what a scheme is now, they still require to be told how the scheme will work. There's a feeling from some in the market that schemes are forced onto companies and their policyholders but that is not the case. You need the support of the policyholders to be able to put a scheme in place. It can't happen without their support."
Mr Winter admits that three years ago investors in the runoff market were hard to come by. "Times have changed and there is an appetite to invest in run-off," he says.
"They're willing to consider the run-off market when three years ago they were not, but the disadvantage is that with a greater deal of capital available it has impacted on the premiums paid."
He says the history attached to the London market has naturally made it a centre for run-off, given its involvement with the key claims issues such as US asbestos liabilities. The fact that schemes of arrangement are carried out under English law is also an advantage for London," Mr Winter adds. "I also think the sheer size of the London market is a factor."
According to Mr Winter, the market faces a number of challenges but has been working hard to deal with the spiral issues of the past.
"I think the challenge ahead will be dealing with the recent US catastrophes," he says. "Run-off by its very nature follows the events of the market and I expect the US catastrophes to be a challenge in the years to come."
Peripheral market
He adds that while a decade ago run-off would have been seen as a peripheral market, it has since established itself as a key part of the insurance and reinsurance sector. He says every indication is that run-off will continue to develop.
Ruxley is seeking to take the market forward with an initiative designed to further increase the services to policyholders and to bring a new independent check-and-balance system into the equation.
Mr Winter says the company believes the appointment of an independent monitor is needed to provide external oversight for policyholders of a scheme's architecture and of the process as a whole. The monitor would not be involved in the day-to-day management of the scheme and would provide a point of reference for policyholders.
Ruxley believes such appointments will enhance the reputation of schemes and increase the level of policyholder awareness. "Appropriate candidates for this role would be highly-respected run-off experts drawn from such sources as the topflight law or accountancy firms," he says. And while this is not currently a regulatory requirement, Ruxley says it would seek Financial Services Authority approval of monitor appointments to further ensure the impartiality of such a role.