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April 30, 2008

E&Y UK streamlines insurance run-off services

Ernst & Young UK (E&Y) has launched a new insurance run-off team to bring focus and leadership to the firm’s insurance run-off services. Kevin Gill, a former consultant and PricewaterhouseCoopers (PwC) UK director, will lead the team.

Insurance run-off, also known as discontinued business, is primarily concentrated around non-life insurance, Gill told the International Accounting Bulletin. The run-off occurs when a company stops writing a certain line of business.

The insurance run-off market is large and growing. A survey produced by KPMG Europe in October 2007 found the total liabilities of the UK non-life run-off market was estimated at £32.7 billion ($63.6 billion). A survey published by PwC in February 2008 estimated the overall size of the European run-off market to be €202 billion ($312.4 billion).

“Discontinued insurance is quite a big part of the insurance industry these days and quite a lot of the big carriers have got it or wish to dispose of it or do something with it… there is a growing market in people wanting to buy run-off and there’s lots of capital coming into the marketplace,” Gill said.

Changing EU legislation, particularly the Third Non-Life Insurance Directive, has created more opportunity for movement in the insurance run-off market within Europe.

“You should start to see companies in Germany and the like moving run-offs to the UK. The UK is the centre of excellence for dealing with run-off business and there are some more restructuring techniques available in the UK to help close run-offs,” Gill said.

The UK member firms of KPMG and PwC also have dedicated insurance run-off practices, Gill noted, however E&Y’s new group has a slightly different focus. “Both KPMG and PwC have grown [their run-off practice] out of their insolvency departments – starting with restructuring insolvencies and moving into the solvent reconstruction market,” he explained. “Essentially E&Y have done it differently across the whole firm. There is some in insolvency, some in M&A and some in regulatory areas. I will be bringing it into one area, but from our point of view we are putting ours in the transaction advisory side, very much from a solvent advisory basis.”

Carolyn Canham and Nicholas Moody

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