Increased non-life legacy deal sizes reflect trust in market, PwC says

Written by Michael Griffiths

11/09/2023

The global non-life run-off market remains “active”, PwC has stated, as figures showed that $9.4bn of estimated gross reserves were transacted across 37 publicly announced deals in the 12-month period to the end of the first half of 2023.

Compared to the same period a year earlier, there is an almost identical total deal value – after there were $9.3bn in the 12 months to H1 2022 – but a third fewer announced deals, with 55 deals being completed in that period.

PwC stated that Q1 2023 saw record deal activity, with a concentration of large deals involving LPT/ ADC and RITC transactions, both at Lloyd’s and in the company market, reflecting a general shift towards demand for reinsurance-based capital relief solutions.

The trend towards more reinsurance-based structures has seen some transition for a legacy market that has traditionally seen expertise in liability management as a core driver of value creation.

Liability restructuring partner at PwC UK, Andrew Ward, commented: “The larger deal sizes we’re seeing reflects trust in the market. While deal activity has slowed since the record first quarter as large deals have been digested, we expect a number of deals of varying sizes to complete in the remainder of 2023. The ongoing hard market, abundance of buyer capital and increased focus on deal generation by intermediaries means the legacy sector will continue to remain buoyant.

“The market has generally retained good pricing discipline, meaning deals have been left on the table – although we’re now seeing some of these deals returning to the market. While the US and Lloyd’s markets will continue to be active, opportunities exist in Europe and Asia Pacific, as well as in different classes of business, such as motor and transactions involving more recent underwriting years. These all require differing approaches to risk assessment, due diligence and operational capability – challenging buyers to be flexible in their approach.”

PwC also said it is expecting “further evolution” in the acquirer landscape, with new entrants, consolidation and some exits possible as business plans develop.

“As CEOs and COOs seek to match the development of their operations with the growth of both assets and liabilities under management, we’ve seen an increased focus on investment in IT infrastructure, including the consideration of AI tools,” Ward added.

“Many players are already seeing value in taking these steps both in their existing portfolios under management and in their deal processes. The investment in these areas is overdue but signifies the market is here for the long-term.”

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