Softening market to drive legacy shift

Softening markets are expected to change the mix of business transferred to the legacy market, but this is unlikely to alter the total volume of reserves transferred, according to Enstar’s chief strategy officer.

While the legacy market saw greater demand for capital management solutions during the hard market, David Ni says he expects to see more risk management and strategic solutions as the market cycle begins to turn.

David Ni, Enstar

“The mix of [solutions] might change depending on the underwriting cycle, but I think the overall activity probably won’t,” Ni tells Insurance Day.

“If you’re in a hard market, you might see more capital solutions because people are looking to deploy more capital. In a soft market we might see more risk management solutions because there are some lines that are under pressure.”

Opportunities from M&A

Legacy specialist such as Enstar are also seeing more opportunities arising from insurance mergers and acquisitions (M&A), where a legacy transaction can help facilitate deal-making.

The legacy market can provide “strategic solutions” to help facilitate a broader transaction through reserve covers or assuming specific portfolios that require a third-party claims settlement, Ni says.

“Consolidation, we have a role to play there. Sometimes the hardest thing in insurance M&A is who takes the risk around old reserves,” he says. “The sector and we at Enstar have been playing well and we’re very happy to be a part of a solution to a broader strategic initiative or transaction.”

“Consolidation, we have a role to play there. Sometimes the hardest thing in insurance M&A is who takes the risk around old reserves. The sector and we at Enstar have been playing well and we’re very happy to be a part of a solution to a broader strategic initiative or transaction”
_{David Ni
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A recent survey by PwC found nearly 70% of respondents expected an uptick in M&A activity to lead an increase in legacy deals.

The firm’s Global Insurance Run-Off Survey 2025 also highlighted an increase in insurers using legacy transactions as a capital management tool, although trends differed depending on class.

Overall, PwC estimated global non-life run-off liabilities at $1.13bn as of the end of 2024. This was an increase of 11% on the previous PwC survey, which looked at data from year-end 2022.

Ni says: “Our sector is maturing, which is a good thing. We’re becoming more accepted and part of the mainstream insurance industry. Thirty years ago, if you had a problem you went to the legacy sector to see if there’s a solution, so there was an association with legacy and problems.”

Problem solving is still a key part of the segment’s offering, but “it’s problem solving in a different way,” he continues. “The industry’s just morphed to become more multifaceted and that has allowed us to play in a lot of different areas and be value added to our clients”.

ILS application

One area where Enstar is applying legacy solutions is the insurance-linked securities (ILS) segment to help alleviate issues relating to trapped collateral.

If an event triggers an ILS instrument to pay out, the collateral tied up in the product cannot be released until that claim is fully settled, which can sometimes take longer than investors would like. However legacy structures can be used to release collateral before all the claims are fully resolved.

“Because we look at retrospective underwriting, not prospective risk, we’ve been able to take that retrospective [approach] and apply it to the claims settlement… and basically take over the position of the fund and release the capital back to investors. That’s been very well received and there’s been lots of interest,” Ni says.

Enstar is also offering ILS funds forward solutions, where the business commits to be take on the liabilities, as with other run-off transactions, within certain parameters. That provides investors with the confidence they will have liquidity after a set amount of time, as well as transparency regarding costs.