PwC: Global non-life legacy trades total $9.4bn over past year

The global non-life legacy market transacted estimated gross reserves of $9.4bn across 37 publicly announced deals in the 12-month period to the end of H1 2023, according to analysis by PwC.

This marked an uptick on the $9.3bn transacted in the 12 months to H1 2022, although the market did see a dip in deal volume from last year’s 55 deals.

These included a trio of transactions with gross reserves of over $1bn, including Enstar’s $1.9bn loss portfolio transfer (LPT) with QBE, RiverStone’s £1.2bn transaction with MS Amlin and Compre’s $1.3bn ground-up LPT with SiriusPoint.

Speaking at the report’s launch at this year’s Rendez-Vous in Monte Carlo, Alan Augustine, director of deals at PwC UK, said: “Deal pricing remains competitive and underwriting discipline has generally held up great for other markets.”

However, the director noted the market was going through a “transition phase”, which saw a shift in demand towards reinsurance-based capital relief solutions.

Also speaking at the event, Andrew Ward, liability restructuring partner at PwC UK, underlined that the trend towards increased volumes of liabilities transferred will continue, adding that “capital” is a buzzword in the legacy space.

“Quotes that we’ve got from sellers of books in business seem to be any array of words as long as it's got capital in front of them. Rationalisation, optimisation, efficiency, relief and release. It’s a massive feature of the market at the moment,” underlined Ward.

The legacy sector has also been an attractive area to deploy capital.

Barry Gale, Aon’s head of legacy, explained: “What we've continued to see is an influx of capital into the market, which is a great thing for organisations which have wanted additional capital and have got a strong track record.”

Gale noted that the legacy market has recently seen an influx of new and existing investors.

He said this had driven larger deals and more investment in data, with the latter helping to drive better claims and actuarial decisions.

On geographical and class demand, Ward added: “While the US and Lloyd’s markets will continue to be active, opportunities exist in Europe and APAC, as well as in different classes of business, such as motor and transactions involving more recent underwriting years.”

Convergence with live market

One topic that came up in discussion at Monte Carlo was the suggestion that the legacy market had started to converge with the live market.

There were suggestions that this helped add to the sophistication of legacy players and was in many ways positive – but Gale underlined that the legacy market should not stray too far from its original purpose.

“I think we have got to remember why legacy grew in the first place. The focus should be tightening the proposition, making it even more compelling to clients – not necessarily moving more and more towards reinsurance,” said Gale.

“There's also a fundamental reason why the legacy market exists. It's so important in continuing to be better at what we do. All of us working to raise the profile of the legacy market and the things that we're currently doing is every bit as important as perhaps looking and feeling a bit more like a copycat reinsurer.”