The Panelists for the first education session of our virtual Transactions & Networking Forum included: Paul Corver, Group Head of M&A, R&Q, Marcus Doran, EVP, Group Complex Claims Officer, Armour Risk Management (Moderator), Paul Ginnett, CEO, Allianz Reinsurance America, Inc., Linda Johnson, Head of Legacy Practice, TigerRisk and Matt Kunish, Chief Business Development Officer, Riverstone. The distinguished panelists offered their opinions on hot issues, trends, deals, observations and predictions for the runoff space. Marcus Doran moderated, and kicked off the discussion by asking the panel to describe the key elements of an effective runoff transaction. Matt Kunish looks for a motivated seller, and C-Suite engagement on both sides of the deal. Paul Corver echoed that sentiment and urged parties to make sure there is business-side involvement – “don’t leave it all up to the lawyers.” Paul Ginnett recommended that both sides should understand the others motivations: “Maintain dialogue and relationships.” Linda Johnson said an excellent claims strategy is important for buyers, and an effective transaction is one “where everyone wins.”
On the topic of what motivates legacy deals, Linda Johnson noted that there has been a fundamental change in perception. Where runoff deals were formerly seen as recognition of a failure, they are now seen as a key element of portfolio management, subject to sophisticated accounting and offering key benefits, like finality, to participating companies. The approach of regulators has changed as well. Whereas regulators may have once been unfamiliar with the concepts of legacy sales and transfers, there is now much more recognition of the methods and goals from individual state departments of insurance.
Asked about the pace of deals, Paul Corver shared his observation that some sellers are taking a wait and see approach. Matt Kunish thought that might reflect caution on the part of buyers, who may be more apprehensive about future loss development on the books they are purchasing. Nevertheless, Paul Ginnett sees a strong pipeline of deals in place in the United States. Matt Kunish sees a window opening for transactions involving Lloyd’s, with certain syndicates seeking an exit strategy and others getting serious about performance.
The panel discussed the increased presence of captives in the runoff deal-making space, offering the possibility of transactions large and small. Matt Kunish commented that captives present unique challenges – like executives and officers who are unfamiliar with the insurance market – but may also represent opportunity, especially if Covid-19 leads captives to try and exit the space.
Asked about the impact of Covid-19, Paul Corver commented that his organization has never been busier – he believes companies are anxious to free up capital that is currently supporting runoff so that it can be invested in new business in a hard market. Linda Johnson saw a temporary slowdown over the summer as the uncertainty of the course of the pandemic slowed internal decision making at firms. She thinks the industry has now shed its hesitancy, and expects the pace of deals to accelerate through year-end.