New Research From Hogan Lovells Reveals Favoured Means of Dealing with Discontinued Lines of Business
03 February 2011
LONDON, 3 February 2011 - New research by Hogan Lovells' London insurance practice has provided a valuable insight into the resilience of the run-off insurance market.
Key findings of the research are:
- For companies in run off, schemes of arrangement were considered the best way of dealing with discontinued lines of business;
- For active companies, Part VII transfers were the favoured means of dealing with discontinued lines of business;
- Where there is U.S. business, a sale of the subsidiary was considered the best option; and
- For active European companies with discontinued lines of business, purchasing run-off reinsurance from the local market was not seen as a popular option.
The research was carried out on a pool of 120 participants from the insurance sector at a seminar and industry panel discussion on 25 January at Hogan Lovells' London offices.
The research participants included representatives from almost all the major insurance groups in the London market.
The results revealed that companies in run-off were still highly attracted to schemes of arrangement, considered by 56% of the audience to be the best way of dealing with discontinued lines of business. In comparison, when considering active insurance groups, 52% of the audience was more attached to Part VII transfers, and 26% to share sales.
These figures altered markedly when the presence of US business in the portfolio was considered, with 45% of the audience considering the sale of subsidiaries as the best option. However, 20% still felt that schemes of arrangement were the preferred option, demonstrating the resilience and attractiveness of this exit solution.
A European perspective revealed resistance to purchasing run-off reinsurance from a local market, with three times as many respondents stating that, as a Continental European insurer, they would buy run-off reinsurance from an 'A' rated foreign reinsurer, thus throwing down the gauntlet to the Munich Re and Swiss Re run-off capability. More than a third of the audience would move the portfolio to London and seek a UK exit solution.
Peter Taylor, consultant in Hogan Lovells Insurance & Reinsurance team, said of the seminar and market:
"After a couple of fallow years, the market for exit solutions has bounced back, with Solvency II now a fixed point in the immediate future. We felt the time was right to present what had become an annual feature of the London run-off market and were delighted by such a high turn-out, filling our auditorium. This market is very much alive and kicking."
Chaired by Peter Taylor, the Hogan Lovells speakers at the seminar were Corporate Finance partner Tim Goggin, Business Restructuring & Insolvency partner Alexander Wood and Insurance & Reinsurance Senior Associate, Chris Hill.
The panellists were Andrew Dyer (Wholesale Insurance FSA), David Hindley (partner at Deloitte), Bill Bower, (CEO of Met Re UK), and Barry Isaacs (a barrister at 3/4 South Square).
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