Vol 9 (2012) - Issue 1

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Discontinued Insurance Business in Europe

In the recent fifth edition of the PwC Survey of Discontinued Insurance Business in Europe (the 'Survey'), produced in conjunction with the Association of Run- Off Companies, we assessed the developments in the European run-off market over the last 18 months. This article summarises the Survey’s key findings.


Size of the market

We estimate that the size of the non-life European runoff market is now in the region of Euros 218 billion. There has been a growth in run-off in some territories, notably in Germany and Switzerland. As our Survey suggests, this may reflect a clearer and more consistent focus in the definition of run-off and a more open approach to dealing proactively with discontinued business lines. In the mature UK market run-off liabilities have continued to shrink. Commutation activity and the finalisation of some solvent schemes of arrangement have contributed to this trend although this has to some degree been offset by underwriting exits in lines such as direct motor liability.


Management and structure

When we asked respondents to define run-off business, many identified more than one of the suggested definitions as being in use at their organisation. The responses reflect a continued concentration of the view that run-off business is most widely defined as lines of business that are no longer written. Some 85% of respondents took this view, a 3% increase from last year. 31% took the view that run-off business was defined as business which is with a party where there is no ongoing business relationship, a 4% increase on last year.

The concentration of responses as to the question of the definition of run-off business contrasts with the spread of responses to the question on the point in time at which an organisation classifies business as being in run-off. 27% of respondents consider business as being in run-off at the date of expiry of the policy, and a further 27% from at least three years from when policies expire.