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  #11  
Old 12-17-2017, 09:14 AM
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Originally Posted by Colymbosathon ecplecticos View Post
How often do new claims come up from thirty years ago in a life book?
New claims on life can continue to occur for a lot more than 30 years. Payouts on life claims can also continue for even longer than the policy lasts, due to settlement options. Generally speaking, life insurance coverages are a lot longer term than P/C.

I don't think that was what you were asking, though.
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  #12  
Old 12-17-2017, 09:49 AM
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New claims on life can continue to occur for a lot more than 30 years. Payouts on life claims can also continue for even longer than the policy lasts, due to settlement options. Generally speaking, life insurance coverages are a lot longer term than P/C.

I don't think that was what you were asking, though.
If you wrote a one-year term policy in 1980, you would be pretty unlikely to learn of a new claim this year, right?

If you wrote ten consecutive one-year term policies starting in 1980 an a single life, it is unlikely that they would all produce claims from a single event, right? Especially if you thought that you were only covering death, but now the courts have decided that coughing triggers coverage.
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  #13  
Old 12-17-2017, 09:53 AM
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While there are differences between P&C and Life, the principle is the same isn't it?

It costs less to add $100m of business onto a $700m block than it does to run the $100m on it's own.
Just the fact that you think of business in terms of premium says a lot. What if that $100m of business really should have been $1B of business, but you priced it wrong?
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  #14  
Old 12-17-2017, 09:55 AM
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I see. We don't really have to deal with latent claims (like asbestos) like P&C folks do. Almost made Lloyd's go under in the 90s if I recall.
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  #15  
Old 12-17-2017, 10:34 AM
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Originally Posted by Colymbosathon ecplecticos View Post
If you wrote a one-year term policy in 1980, you would be pretty unlikely to learn of a new claim this year, right?
I don't think anybody actually wrote such a policy then.

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If you wrote ten consecutive one-year term policies starting in 1980 an a single life, it is unlikely that they would all produce claims from a single event, right? Especially if you thought that you were only covering death, but now the courts have decided that coughing triggers coverage.
Um. Life insurance policies written in the 80s may have been called "term insurance" but they were written in the form of modified premium whole life.

To get to the heart of the matter, as in the bolded part, the long term liabilities on life insurance are recognized and anticipated. And premiums still come in, to a large extent.

But the really long risks on P/C are not only long term, but also unexpected. That was why I said "I don't think that was what you were asking, though. "
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  #16  
Old 12-17-2017, 10:38 AM
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Just the fact that you think of business in terms of premium says a lot. What if that $100m of business really should have been $1B of business, but you priced it wrong?
Heh. Like life insurance company product Long Term Care insurance.
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And def agree w/ JMO.
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This. And everything else JMO wrote.
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Yup, it is always someone else's fault.
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I recommend you get perspective.
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  #17  
Old 12-17-2017, 10:49 AM
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I see. We don't really have to deal with latent claims (like asbestos) like P&C folks do. Almost made Lloyd's go under in the 90s if I recall.
Yup. We have lots of stuff like that.

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I don't think anybody actually wrote such a policy then.


Um. Life insurance policies written in the 80s may have been called "term insurance" but they were written in the form of modified premium whole life.

To get to the heart of the matter, as in the bolded part, the long term liabilities on life insurance are recognized and anticipated. And premiums still come in, to a large extent.

But the really long risks on P/C are not only long term, but also unexpected. That was why I said "I don't think that was what you were asking, though. "
My parents bought term life insurance in the 60s. I'm certain it existed in the 80s. It might have only been issued by savings banks at the time. I'm dubious that it was structured as modified whole life, but I suppose that's possible.

https://www.sbli.com/about/

There are pollution claims being paid on policies from before superfund was signed, on coverage that was explicitly excluded. Because a court ruled that slow leakage from an underground tank constituted a "sudden and accidental discharge".

There are asbestos liabilities being paid today on one year policies written in the 50s. And yes, some of them are for people who have developed a cough, and want that insurance policy to cover regular scans to monitor whether they might be developing asbestos-related diseases.

It might have been a policy that cost $10k that now has millions of dollars of claims against it. Oh, and until you actually exhaust any policy limits, you need to pay legal fees. Legal expenses can be substantially more than liability costs. And if you wrote penises and operations coverage, there might not be any aggregate policy limit, there might have only been a per-claim limit.
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  #18  
Old 12-17-2017, 11:03 AM
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... And if you wrote penises and operations coverage, there might not be any aggregate policy limit, there might have only been a per-claim limit.


Twss?

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  #19  
Old 12-17-2017, 11:19 AM
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Just the fact that you think of business in terms of premium says a lot. What if that $100m of business really should have been $1B of business, but you priced it wrong?
You lose $900m.

What point are you arguing here?
That P&C is so different from Life that you shouldn't buy a business in run off? Cos you need to tell that to the OP.

I don't know P&C but I thought that the reasons it makes sense for Life would be broadly applicable to P&C as well. If it isn't economies of scale, why do they buy run off companies?
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  #20  
Old 12-17-2017, 12:43 PM
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Originally Posted by jas66Kent View Post
I do quite a bit of M&A work (on the life side) and the P&C side is most likely the same.
"I pretty much know what's going on, since I did something else and am too ignorant to see any differences between what I did and what you're talking about". Never stop lol


Quote:
Originally Posted by GargoyleWaiting View Post
While there are differences between P&C and Life, the principle is the same isn't it?

It costs less to add $100m of business onto a $700m block than it does to run the $100m on it's own.
This isn't where the value in acquiring runoff P/C businesses usually comes from (it can add a small amount, but the economies of scale isn't really the driver, it's expertise). P/C has lots of value driven by quality of claims management on sophisticated coverage issues - there's very little parallel in the Life space, where you're trying to decide whether coverage applies, what the policy language actually was (completely possible that there is no longer a copy of the policy anywhere, and everybody is just guessing at the language, which will determine whether and how coverage applies), and what limitations determine the payout, how other policies and coverages apply and share in costs. When the company is in runoff, it's a struggle to keep talented claims people (and the people who were handling claims when the policies were written may be retired by now), and if the acquirer has such expertise (companies like Tawa, Enstar, Randall and Quliter, for example - pretty sure there's a sub of Berkshire doing this now too), then that's a big value driver for the acquirer. Claims expertise isn't the only value driver, but is the largest by far in the transactions I've been involved in.


OP, would recommend that you look through some of the IR and other public info from those companies as a start. Also, there's a session at the 2016 CLRS (maybe this link works? http://cas2016clrsiframe.azurewebsit....aspx?id=85977 ) if link doesn't work, it's called "Runoff book sale considerations" and presenters were Bill Miller, Brian Brown and Thomas Norsworthy, all of whom would be worth searching on their own.
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