Run-off specialists reshape insurer capital deals, AM Best says

Report says some firms reprice risks, add reserve buffers, and cap exposure.

Run-off specialists are now acting as strategic capital partners for insurers, helping them free up capital, simplify operations and focus on core business, according to a new report by AM Best.

The non-life run-off market continues to see a healthy number of transactions, but activity is increasingly concentrated among a small group of large players. 

In the past, run-off deals were mainly done by big insurers and reinsurers buying discontinued or non-core books. 

Over time, a group of specialist firms has emerged and built a clear role in managing these portfolios.

“These specialists are increasingly recognised for their technical sophistication, transactional agility, and ability to provide customised capital solutions,” said Dan Hofmeister, associate director, AM Best.

The report said these firms do not only take on weak or high-risk portfolios. Many are able to reprice risks, build in reserve buffers and, in some cases, cap their exposure, supported by stronger data analytics and claims experience.

However, insurers need to be aware of execution, reputational and counterparty risks, particularly in complex deals that require regulatory approvals or involve long-tail liabilities. 

Over time, the focus of run-off transactions has also shifted from legal finality to capital relief, giving specialists more flexibility to structure deals around regulatory and capital needs.