The first-ever Legacy Market Dialogue (LMD) hosted by global reinsurer Swiss Re brings together experts from the expanding P&C legacy market to debate and reflect on the current state of this increasingly complex and nuanced part of the risk transfer landscape.
On February 10 and 11, senior representatives from the heritage sector from insurance companies, reinsurers, heritage acquirers, brokers and consultants discussed the past and current state of the market, the potential impact of macro and geopolitical issues, and an overview of the heritage market in the United States and Asia Pacific in Ruschlikon, Switzerland.
The session began with a look at the history of traditional markets, during which participants highlighted the original motivations for some of the earliest deals, the impact of Solvency II regulations and soft and hard market cycles, and the shift towards capital and balance sheet considerations.
While participants noted that legacies can be a challenge for some when profits are strong, suggesting there is a greater focus on legacies during softer phases of the reinsurance market cycle, Swiss Re’s analysis found legacies are driven by the interaction of market conditions, cost of capital and portfolio performance, rather than a single factor.
“Strong markets may delay transactions but do not eliminate underlying demand. As conditions evolve, traditions tend to resurface as a tool to address specific pressures rather than as a constant feature of portfolio management – as participants reflect on past adoptions,” the reinsurer explained in its LMD report.
Attendees stressed that growth in traditional markets is now more stable than during the rapid expansion of recent years, with many emphasizing the need for underwriting judgment, claims understanding and the ability to assess how liabilities may evolve beyond model expectations.
LMD participants also highlighted the role of capabilities, both in terms of balance sheet strength and capabilities.
However, participants discussed that legacy remains largely context-specific and is not yet consistently embedded in strategic portfolio management, suggesting that despite the increasing complexity of the industry and awareness of what is on offer, legacy may remain underutilized, in part because reputational considerations vary across regions.
The report states: “The traditional market has become more mature as underwriting methods and pricing assessments have become more selective. However, its use remains largely situational, driven by specific triggers, rather than embedded in regular portfolio management. Perception and familiarity continue to impact adoption, resulting in a gap between increasing awareness and consistent execution.”
Following a discussion of current market dynamics, attendees heard from Charlotte Mueller, Chief Economist for Europe at Swiss Re Institute, who provided a forward-looking perspective on how future macroeconomic and geopolitical developments may impact the risk transfer space.
Particularly for traditional sectors, the shock of uncertainty from geopolitics and the cost of capital was described as particularly relevant.
Summarizing the macro and geopolitical debate, the LMD report said: “Overall, macro discussions reinforce that the external operating environment is becoming more complex and structurally different from previous economic cycles. For insurers and reinsurers, factors such as interest rates, inflation and broader uncertainty are not only sources of volatility, but also impact how portfolios are managed and capital is deployed.”
Swiss Re’s inaugural LMD event also included a dialogue in New York, during which traditional U.S. markets were described as operating in a demanding environment of macroeconomic uncertainty, policy developments, and interest rate and inflation issues. While awareness of legacy solutions is relatively high in the United States, implementation remains more limited and often on an event-driven basis.
Reserve size, improved strategic understanding and dedicated capital and execution expertise were cited as key reasons for the US to consider legacy.
Participants also discussed factors affecting execution in the region, including the regulatory framework (legal transfer mechanisms), the often event-driven nature of transactions considered by rating agencies.
During this part of the LMD event, attendees also learned how US casualties remain a key driver of heritage demand and explored how the US heritage market differs from other regions.
“Broader adoption is unlikely to be driven by intent alone. It will be influenced by economics, ratings treatment and regulatory comfort, as well as whether operators view legacy as a pragmatic capital management tool rather than a solution of last resort,” the report explains.
Traditional markets in Asia Pacific were the next topic of discussion, reflecting views shared by Swiss Re’s Asia Pacific Structured Solutions team and in cross-regional exchanges with Rüschlikon participants.
The meeting discussed the region’s strong growth momentum, the potential for Asia-Pacific to hold 13% of global non-life insurance reserves, market differentiation between developed and emerging economies, and the impact of different regulatory maturity and approaches.
“Asia Pacific is relevant and increasingly important, but it is not yet a scaled or standardized traditional market. It remains a precedent-setting region and opportunities for single traditional acquirers without an established regional presence tend to be small, bespoke and relatively complex,” Swiss Re said.
The global reinsurer’s comprehensive and insightful LMD report, now available for download, summarizes three key takeaways from the inaugural meeting in Switzerland.
The first is the emergence of more mature traditional trading markets as the industry moves increasingly toward strategic relevance.
“The opportunity ahead lies in moving away from reactive deployments towards earlier, more strategic integration of reinsurance/insurers in how they manage their balance sheets and wider corporate and capital priorities,” the report said.
The second key takeaway is the redefinition of capabilities, with capabilities and innovation touted as key differentiators.
Swiss Re explains: “As market demands evolve, capabilities are no longer defined by capital alone, but by broader capabilities – encompassing evolving technical risk expertise, practical claims knowledge and rigorous judgment, as well as a broader understanding of re/insurance beyond pure legacy.”
Third, and perhaps most importantly, is what is likely to shape the next phase of legacy market development.
“While demand for traditional solutions is expected to grow—supported by increased M&A activity, a more proactive portfolio shift after years of growth, and a renewed focus on allocating capital to core segments—the market’s trajectory will be determined by a more complex external environment…
“Ultimately, the next phase of the market is likely to depend not only on growing demand, but also on how entrenched legacy solutions are as strategic levers – especially as market conditions tighten – allowing re/insurers to enhance capital flexibility and respond to increasingly complex scenarios.
“At the same time, the market itself will be tested for its resilience and the ability of legacy providers to deliver pragmatic execution and demonstrate increasingly sophisticated capabilities,” the report concludes.
You can view the full Swiss Re LMD report here.