Run-off and captive disposal

The decision to exit a line of business is never an easy one, but it helps to understand the full range of options and to be able to evaluate these within a framework of re-deploying capital to enhance profitability and growth.   Keeping run-off business on the books usually means capital is trapped for years, dragging down company returns, precluding new investment and diverting management attention.  Freeing up capital and other resources through reinsurance, loss portfolio transfer or business unit sale can lead to enhanced returns and renewed focus.

ICA helps companies evaluate their run-off options in a systematic way.  This may involve an (re)valuation of reserves, a claims audit, modelling current capital requirements (economic and regulatory) and projecting capital release over time, analyzing reinsurance in force, commutation possibilities, credit risk, realistic investment returns on funds held, etc.  Combining what we learn about your run-off book with our market knowledge, we will endeavour to answer the pivotal questions which would drive the structure and timing of any transaction:

  • How much capital, economic and regulatory, is the business tying up?
  • What premium would a third party require to assume the business?
  • What structure makes most sense for the client?
  • What kind of security and assurances would regulators require to approve such a transaction?
  • What would be the P&L impact?
  • What scope is there for participating in profits of an LPT?

Captive insurers or reinsurers that were established under one set of historic conditions – tax codes, underlying business risks, insurance price/availability, etc. –  may no longer make sense as the times change.  Disposing of unneeded captives can often be tricky depending on the nature of the business the captive has been underwriting, and the market for such entities is neither liquid nor transparent.  ICA has international partners who specialize in the take-over of unwanted captives and can advise clients on structure, pricing and regulatory issues.