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Monday, 07 December 2020

More and more insurance companies are wanting to disengage from their legacy contracts. The administrative and financial effort these require has become prohibitive. That is why companies are increasingly considering the negatively connoted run-off option. The Legacy Portfolio Partners GmbH (LPP), which has been newly established in 2020, provides a solution that makes it possible to profitably continue to manage legacy portfolios without portfolio transfer.  In this interview, Ralph Altenburger and Alexander Martin-Boes, the two managing directors of LPP, open up about the issues with old contracts and how they want to free primary insurers from legacy portfolios, both economically and operationally.

Mr. Altenburger, why do insurers want to part with their legacy portfolios?

The are several reasons for this. Often these are portfolios with old tariff generations, which no longer fit into the strategy and portfolios that are administered on outdated IT systems. They represent an increasing burden for insurance companies. This is because they take up both financial and personnel resources and thus reduce the companies’ innovative capacity to, for example, successfully navigate the digital transformation.  Today, insurers must implement their strategies faster in order to remain competitive. As a result, for many it is hardly financially worthwhile to continue to manage legacy portfolios.

And how does LPP come into play here?

We take the burden off primary insurers by transferring old portfolios that no longer fit the current business model. We also provide support for all relevant customer and administrative processes. LPP sees itself here as an underwriting agent. This means that as an insurance intermediary with extended powers, we further manage, process and develop the portfolios on an ongoing basis. We have a modern, future-proof IT infrastructure and can administer the policies efficiently. Together with the international reinsurer Swiss RE, we have developed a holistic solution that optimally combines risk capital, insurance expertise and technology. Swiss Re is responsible for assuming the actuarial risk. The result is an integrated solution for legacy portfolios in the insurance industry, which has never been seen before.

What is the difference between this transfer and a standard run-off?

The crucial difference is that – unlike a conventional run-off – the transferring primary insurer does not cede the customer to another insurer and thus possibly loses the entire customer relationship. LPP takes over "only” the part of the portfolio that the primary insurer wishes to cede. LPP remains neutral with regard to the customer relationship of the ceding primary insurer.  In addition –  and again in contrast to a conventional run-off – we only target “active portfolios”, with no (legal) portfolio transfer.

Mr. Martin-Boes, could you explain just how this transfer works?

To put it simply: LPP migrates the legacy data to msg’s own nexinsure platform. With a systematic approach, customers with old tariffs continue to be efficiently managed by LPP, without increasing costs, or can be transferred to new tariffs. LPP thus assumes all the tasks of an insurance intermediary, but with extended powers, for example in claims settlement. As LPP acts as a service provider for insurers, LPP does not behave like a competitor to the existing sales organization.

What are the implications for the customers?

Nothing changes with regard to the claims of the policyholders as a result of the transfer of the old portfolio. Contracts continue to run their course. There are no disadvantages. On the contrary: Insured persons can continue to rely on comprehensive support. We are specialized in the active management and development of legacy insurance portfolios in the non-life area. This allows us to concentrate fully on our customers. The primary insurers also benefit from this. They can focus even more on their future core business, whilst maintaining the customer relationships.

This sounds like a win-win situation.

Indeed, our solution lets insurers open up new business perspectives and increase their flexibility. Thanks to our lean organization, high-performance IT and our focus on legacy portfolios, we can operate more cost effectively than primary insurers. As we pass this cost benefit back to the primary insurers, they do not have to pre-invest in the solution. At the same time, this puts us in a position to focus on the policyholders.

For more information about Legacy Portfolio Partners GmbH, visit www.legacyportfolio.partners