ID Comment: The legacy market could help facilitate the transition to net zero
The stigma of run-off could go full circle for the sake of the climate
The legacy market could enjoy its most important role yet, as an engine to push re/insurers to net zero
There was a time when run-off was a dirty word. It meant a way to move distressed business off the balance sheet. It meant failure. It meant stigma.
As the run-off market evolved though, it gained a more respectable title – legacy. This meant a prudent assessment of the past. It meant pruning for new life to grow.
There is, however, business on the books of re/insurers that could see the legacy market return to its original purpose – a destination for embarrassing policies.
There will be no prizes for guessing that underwriting fossil fuel projects in one part of the company while polishing an environmental, social and governance (ESG) strategy in another is – whisper it – a stigma. Forget distressed business. What about the distressed planet?
Underwriters need to move away from supporting such unwanted business, which would lead to significant pools of reserves. The legacy market has proved itself to be the most effective way of running unloved business down.
This is an opportunity. If you can recycle the capital behind those reserves so underwriters can then start thinking about products that benefit a new and cleaner world, then why not get on with it?
The legacy market would go full circle, taking us back to stigma. If re/insurers want to be part of the solution to net zero, then it is time to offload the stigma of greenwashing. The industry will feel – and look – better for it.
Perhaps, then, the market that changed its name from "run-off" to "legacy" could become "mitigation".