NEWS
Legacy re/insurers have plenty of ‘dry powder’ to deploy
Re/insurers are still looking for ways to free up capacity through transactions with legacy re/insurers: McGill and Partners.
Legacy re/insurers have “plenty of dry powder” in terms of capital that can be used to allow property casualty reinsurers to free up capacity to take advantage of the hard market.
And the recent departure of a number of legacy re/insurers from the sector will not put a damper on demand for capital solutions, according to Andy Hill, head of structured solutions at McGill and Partners.
Hill, who joined McGill from legacy re/insurer DARAG where he was chief operating officer, said re/insurers are taking advantage of loss portfolio transfers and other structures to gain capital rather than going to the investment markets which remain sceptical about the industry’s results.
“While there have been a couple of exits from the sector, there is a huge amount of dry powder in terms of committed capital within existing legacy firms,” he said. “That is available support. There’s probably more capital available in the legacy space than there is elsewhere in the market, so the chance for insurers and reinsurers to take advantage of that is a huge opportunity for them.”
Hill added: “Legacies are now firmly a trusted part of the ecosystem.”
A role for brokers
He said brokers can play a role in the development of the relationships and can also help to identify new opportunities for the sector.
“There’s still a lot of room for brokers and intermediaries to play in helping to ensure the efficiency of similar transactions, to ensure clients are making the right asks of the legacy market and making sure they know what they want.
“Legacies are now firmly a trusted part of the ecosystem.”
Andy Hill, McGill and Partners
“We can avoid everyone’s time being wasted by setting pricing expectations, guiding and helping with that. We’ve had very positive reaction to the conversations we’ve had.”
Hill said there were opportunities for legacy re/insurers to grow in Asia and in new lines.
“You see certain legacy markets growing as centres of excellence,” he said, including specialty lines, provided it was part of a balanced approach.
“We might see some forward flow transactions or other ways in which legacy markets can step into the shoes of reinsurance carriers to relieve and fix the economics for certain carriers and let them off risk, either by a novation computation after year three, or for large fronting carriers out there who would like to recycle some of that capacity, would like to crystallise the economics of certain underwriting years.
“The legacy carriers could become a permanent fixture in their capital structure and their capital base, by stepping in and providing a solution,” he concluded.
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