Influx of capital can impact premiums: The run-off market is proving increasingly attractive to investors but this influx of capital can impact premiums paid.

03 February 2004 (Leader Column)

INSURANCE DAY

Press Coverage:
Run-off on a positive note

INTEREST in the business of insurance run-off has risen significantly in recent times and developments have indicated that the focus is shifting to speedier and more certain settlements. As the concept of solvent schemes of arrangement catches on in parts of the US, a very real 'run-off industry' is developing.

Recent Press Coverage

(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?

And this run-off industry is bringing new and innovative processes to the insurance sector. Look, for example, at Ruxley Investments, a London market run-off firm which last year used its Policyholder Finality Programme to close the asbestos, pollution and health hazard (APH) book of former AGF subsidiary City General, in less than 12 months.

Ruxley Investments said its programme allowed it to deliver total finality to the run-off and kill off the exposure, which included around 1,000 claims, mainly from US corporations. At the end of last week, the creditors of the Kwelm companies gave their approval to a scheme that would see that run-off completed 10 years earlier than expected.

And just like with the City General scheme, the Kwelm arrangement will see creditors receive higher payouts than they might previously have expected.

Equitas, too, has been busy, last week confirming that it had reached a $575m settlement with US giant Halliburton, which effectively brings an end to its asbestos exposures relating to the engineering firm.

It is significant that Equitas’s managers welcomed the resolution, saying it proved they could complete such arrangements and emphasising their appetite for further such deals.

The key issue behind these deals is finality. The run-off managers are able to draw a line under the exposures, and the creditors are able to see their money a lot quicker, and sometimes in greater quantities, than before.

Naturally, this will not prove a suitable model for all future schemes of arrangement, but it is fair to say that it will work successfully in many cases and, thus, that the face of the run-off market has changed significantly and for the better.