Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Brexit may spur more deals in legacy general insurance policies

Stock Markets Oct 17, 2019 12:26PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

By Carolyn Cohn

LONDON (Reuters) - Britain's impending departure from the European Union is creating expansion opportunities for specialist general insurers who buy up and manage policies closed to new customers.

Whether Britain leaves the European Union without a deal or under a so-called hard Brexit, British insurers selling policies into the EU will need a local subsidiary, and vice versa.

British Prime Minister Boris Johnson said on Thursday that Britain and the EU had agreed a new Brexit deal, but he still faces resistance from other parties in parliament.

If a Brexit deal is finally agreed it will give insurers more time to set up EU subsidiaries, but domestic-focused and smaller firms are reluctant to do this because of the cost.

Another option for those insurers is to end their overseas operations and sell books of legacy business to a specialist insurer.

European insurer Darag - which specializes in buying closed books - has set up in Britain this year, and expects Brexit-related deals. The firm, which now has seven UK employees, has already had enquiries, its chief executive Tom Booth told Reuters.

Chris Fagan, CEO of insurer Catalina, another closed-book specialist, also told Reuters that Brexit could have a positive impact for his firm.

"Brexit is causing EU insurers to look at their structures and this brings non-core lines into focus, leading to opportunities for the acquirers," said Andrew Ward, a director for insurance deals at PwC.

Fortitude Re, a vehicle set up by U.S. insurance group AIG (N:AIG) with investment from private equity firm Carlyle to house AIG's closed books, is also planning to buy or reinsure other closed books and expand into Europe, four sources told Reuters. AIG declined to comment.

There are nearly $800 billion in closed books of non-life insurance globally, including $300 billion in Europe, according to PwC. Around $9 billion changed hands across 34 publicly announced deals globally in 2018, the consultants said in its first annual deals report.

Closed book specialists take over old policies or reinsure them, reducing risk for the insurers.

The specialists say they can use economies of scale to manage them more efficiently. Some also invest more of the policies in alternative asset classes to increase returns.

"There is a reasonable margin to be made in this area of insurance," Stephen Roberts, chairman of the Insurance & Reinsurance Legacy Association, said.

Outside the life insurance sector, insurers are usually keenest to offload books of business where claims may still be have to be paid years after an event.

The sector started off with asbestos-related business, but books of business sold these days include motor, medical malpractice and also employers' liability, taken out by companies to cover compensation for work-related accidents or illness.

Zurich Insurance (S:ZURN), for example, transferred UK employers' liability policies totaling $2 billion to specialist insurer Catalina in Dec 2018.

Lloyd's of London's decision last year to tell its members to ditch the worst-performing 10% of their business has led to a number of closed book deals, including in poorly-performing insurance classes such as marine.

They include specialist insurer Riverstone's takeover of policies from Lloyd's syndicate Advent Underwriting in January 2019.

The market for closed life insurance books is also a large one in Europe, with deals such as Italian insurer Generali's (MI:GASI) sale of some of its German closed life business to private equity firm Viridium last year.

Life insurance is less likely to be impacted by Brexit, industry sources say, as the business is often more domestic, and larger life insurers have generally set up the relevant EU or UK subsidiaries.

But for overseas insurers with small UK life insurance business, Brexit could be a catalyst that "may cause people to look again" at their business, Simon True, group corporate development director at closed life insurance specialist Phoenix (L:PHNX), said.

Brexit may spur more deals in legacy general insurance policies

Related Articles

Former Deutsche Bank co-CEO Anshu Jain dies
Former Deutsche Bank co-CEO Anshu Jain dies By Reuters - Aug 13, 2022 10

(Reuters) -Anshu Jain, a top finance executive best known for helping German lender Deutsche Bank AG (NYSE:DB) take on the largest Wall Street firms, died overnight on Saturday...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email