US Captive Reinsurance Runoff Transaction Announcement

In its first transaction with a California self-insurer, Randall & Quilter (R&Q) recently completed a runoff deal to provide the self-insurer with full finality. In a different captive reinsurance transaction, R&Q issued a reinsurance agreement assuming the legacy liabilities of the Bermuda-domiciled captive of a US corporate airline.

Ken Randall, chairman and CEO of R&Q, explained that the California deal highlights the need for firms such as R&Q to work closely with insurance regulators to provide runoff solutions.

In reference to the captive reinsurance transaction, R&Q said it was able to provide the corporate airline with economic relief from its legacy liabilities.

According to Steve McElhiney, president and CEO of EWI Reinsurance, runoff and related transactions present an enormous opportunity in the property and casualty industry. The common tools used for runoff transactions include commutations, loss portfolio transfers, and assumption agreement (novation), which can be employed to release and redeploy risk-bearing capital in support of new business strategies while freeing up organizational resources in return for an agreed-upon premium.

Historically, these runoff tools have been used in North America, London, and Europe. More recently, acquisitive Asian companies are taking on some excellent liabilities but may want to discharge some of them. There are also many captive insurance companies around the world that are subject to using runoff solutions, and many great opportunities for growth in runoff transactions exist.