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Runoff insurers' plan effectiveness a struggle


NEW YORK—A new study suggests that while U.S. insurance companies are having success with developing strategies to manage runoff business, they're having difficulty implementing effective operational plans to meet their goals.

The study by PricewaterhouseCoopers L.L.P.'s Insurance Restructuring Group asked U.S. property and casualty insurance and reinsurance companies with discontinued insurance operations about their runoff management strategy and their plans for the future.

According to PwC, a key measure of the degree to which runoff liabilities are a primary focus for an insurance company is the extent to which the company has crafted separate strategic plans and financial forecasts for its runoff business.

Of the companies PwC surveyed, 83% said they have strategic plans in place for their runoff operations. In most cases, those plans are supported by financial forecasts, and management and staff are measured against the goals set out in the financial model.

Almost 80% of those surveyed said their top strategic goal is to bring finality to assumed exposures, PwC said. Removing portfolio volatility and minimizing claims settlement amounts were other key goals.

PwC's survey also found that companies' outsourcing of runoff management tends to be more focused on specific specialized tasks, rather than involving outsourcing management of the entire portfolio. And, while runoff generates additional regulatory scrutiny, companies' relationships with regulators appear sound.

While most respondents indicated their runoff strategy is supported by a plan and financial model, 67% indicated they are not required to file their runoff plans with regulators.

The study "How U.S. Run-off Liabilities are Managed" can be found at