A pre-Solvency II whirlwind Interview:
Arndt Gossmann, DARAG
With Solvency II implementation just months away, the run-off market is experiencing heightened activity, a vast upscale in transaction sizes and ambiguity between ‘pure’ run-off deals, as Arndt Gossmann, CEO, DARAG, tells Intelligent Insurer.
With Solvency II just months away, are you seeing a difference in run-off activity? Over the past nine months we have certainly seen a significant increase in the number of proposed deals. While some have already been concluded, there are many transactions still in progress in the market. We are also seeing a significant increase in the average deal size. The
estimated total volume of
discontinued business in 2014 was €242 billion ($272 billion). PwC is due to publish the 2015 figures. Even more interesting than the development of the total volume is the increase of the qualified market potential. The number and the size of run-off portfolios that
are being transferred is growing
significantly throughout Europe. By now the level of activity in the formerly more active UK and in Continental Europe is the same. We expect run-off deals to double in 2015 compared to 2014 (€1.4 billion).
Has the wave of M&A being seen in the re/insurance market had any impact on encouraging run-off activity? Yes of course, but the predominant driver is Solvency II. What’s interesting is the change in the types of ceding insurance companies. We had a broad mix of insurers considering deals until 2014, but this has changed and the current transactions now come almost 100 percent from large international, or very large national players. The reason is simple and logical: large insurers have been preparing for Solvency II for some time and have a much higher level of resources available. They have dealt with the implementation and are now focusing on optimisation. We are expecting this to occur within the mid-size players in 2016.
What other trends are we seeing? The distinction between pure run-off deals and strategic deals becomes more and more irrelevant. This is especially true if a non-
strategic line of business includes run-off and active business. There are many M&A situations where a company wants to conclude on an entire line of business and they don’t mind whether they sell these lines strategically or to a run-off insurer. This leads to mixed M&A situations, where you can see a strategic player and a run-off player involved. In any case, former hesitation towards run-off deals has been replaced by pragmatism. It simply makes no sense to tie up capital for non- strategic business.
DARAG acquired its first run-off portfolio from an insurer in Greece in February. How has this benefited the business? Greece is as interesting as any other European market. In normal times, it is driven by a return on equity perspective—it is also implementing Solvency II. We signed a very large transaction last year which is still pending, due to the political situation there. Our commitment to the market remains high. I am confident that we will see a conclusion of the pending transactions and even further transactions in due course. I am impressed by the professional and strong attitude of the Greek insurers and by the way they are manoeuvring through the crisis.
Do you have any expansion plans over the next 12 months? We
are facing a market
13.09.15 SUNDAY
Arndt Gossmann
“What’s interesting is the change in the types of ceding insurance companies.”
we are envisaging a growth of our balance sheet of €100 to €200 million.
What will your recent European hires bring to the business? We have changed the structure of the group and established a second strategic risk carrier, a protected cell company (PCC) in Malta. We can now offer more tailor-made solutions for our clients with complex portfolios. Our second risk carrier will have a similar size of balance sheet as the German one within the next year. Thus, DARAG is becoming a real group. This is very exciting but we need to keep
that is not
developing organically but which is driven by a single date: January 1, 2016. We have concluded more
transactions than any
other player in Continental Europe and we want to maintain our leading position. With regard to the requirements of large transactions, our pole position is a big advantage. With last year’s acquisition of DARAG by Keyhaven we gained the capital strength that is necessary to make those large transactions and can now operate in the three million digit area. This year alone
14 | MONTE CARLO TODAY | DAY 1: Sunday September 13 2015
the proximity to our clients during expansion which is why we have set up a new management committee. With Simon Minshall and Tim Braasch we
committed enhance our local top managers for
DARAG. I am pleased that we were able to
management with
key personalities in their markets. Frédéric Allemand has been
appointed as country
manager for Italy, France and Spain. Joanna Aquilina has been appointed as CEO in Malta, and Paul Van Coillie will overlook our activities in CEE, Benelux and Portugal. n Arndt Gossmann is CEO at DARAG. He can be contacted at:
a.gossmann@darag.de
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