Strategy
When a company enters run-off there are a number of strategic options available. These options can include conventional run-off, commutation, scheme, sale, reinsurance to close, portfolio (Part VII) transfers and/or various combinations thereof.The determination of an optimal strategy and the implementation including timing of this strategy is critical and requires a detailed understanding of the:
- Company’s risk objectives and how these relate to the company’s overall business objectives and/or those of key stakeholders;
- Practicalities of implementing the various possible strategies.
The consideration of these options can be aided by the development of a model of the assets and liabilities of the entity. The tools and techniques we use on legacy business are based on the same sophisticated and state of the art approaches we have developed to reserve, set capital and assess risk for live insurers and reinsurers. For example such a model can indicate the likely risk premium which would be required for a portfolio transfer and compare this to the risk premium typically required for the commutation of a portfolio.
EMB have the experience of all of these various forms of exit strategy and the necessary experience of capital modelling techniques to support clients in designing optimal exit solutions for their portfolios.