Legacy reinsurance
The business of taking over portfolios closed to new business in order to manage their run-off.
September 1996: Lloyd's launches Equitas, which takes over its syndicates' liabilities for 1992 and prior years to run them off. Legacy reinsurance covers the firms whose business is taking over insurance or reinsurance liabilities closed to new business and running them to extinction. The transfer happens by portfolio transfer, by retrospective cover, by novation or by buying the carrier itself. The problem it solves is scarce attention: managing a claims tail demands specific skills, settlement discipline and a patience that active insurers cannot devote to business that no longer produces premium. A specialist doing nothing else settles better and faster, and earns the spread between the price paid and the true cost of run-off, plus the investment return over the period. For the seller the deal releases capital, removes volatility and lets teams refocus. The sector has institutionalized, and the volume of liabilities transferred this way is now counted in tens of billions a year.
A European insurer sells a liability portfolio discontinued in 2011, carrying 480 million euros of reserves, to a legacy specialist in 2026 for a premium of 505 million including adverse development cover. The deal releases 92 million of regulatory capital and removes a line whose annual volatility ran at 6 percent of the seller's own funds.
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