While the overall size of the life and non-life insurance market has remained stable, the size of the capital tied up in run-off has increased appreciably to £14.5bn in life (up from £11.5bn in 2004) and £4.8bn in non-life (up from £4bn in 2004), according to the findings of the annual UK Run-Off survey, produced by KPMG and commissioned by the Association of Run-Off Companies (ARC).
The report shows that the total policyholder liabilities of UK life assurers in run-off in 2005 were over £136bn, an increase of £1bn on 2004 and representing 12% of the total life market. Darryl Ashbourne, director in KPMG restructuring insurance solutions, said: “Policyholders liabilities in run-off increased from £75bn to £136bn in the period 2001 to 2005, an astounding 81%. This clearly shows there is still life in the run-off life market.”
In the UK non-life run-off market, total liabilities at the end of 2005 (including Lloyd's syndicates) are estimated at £38.2bn, a reduction of £0.2bn from 2004. This represents 19% of the non-life market compared to 23% in 2004. This market is substantial and the drive to more actively manage these books of business is evidenced by the continuing use of solvent schemes to achieve finality as well as the growth in the use of Part VII transfers.
“For the first time, an analysis of Part VII transfers is included in the survey, and (like solvent schemes) their popularity has been increasing in recent years,” said Steve Goodlud, director of KPMG restructuring insurance solutions. “There have been 34 such transfers for non-life portfolios since the procedure was introduced in 2001. The ability to include the reinsurance asset as part of the transfer has made them very attractive as a reorganisation tool.”
