The COVID-19 pandemic has deeply affected the insurance industry and many companies are divesting part of their activities. Highly specialized companies have identified a gap in the market, creating a lucrative business from existing insurance portfolios that investors can also take advantage of.

Insurance is one of the few sectors that has managed to avoid being disrupted by digitalization. In fact, most insurers have been able to keep their business models intact in recent years.

It could change. The global COVID-19 pandemic has had an impact on businesses. Higher investment performance can no longer easily compensate for lower premiums. Global diversification cannot either, especially in the current environment of low or negative interest rates.

Entirely new business models

Disruptive measures are needed to maintain profitability and the necessary capital quotas. These can take the form of mergers, takeovers, divestitures or partial divestitures of business units. Or it could be a completely new business model.

Either way, regulation in the EU, which continues to strengthen, is likely to accelerate the force exerted by such trends among the approximately 2,500 general insurance companies in Europe.

Digital platform of the Swiss software company

Highly specialized companies are entering the market gap created by traditional insurance portfolios. They manage business risk and administration until the last policy expires in a legacy wallet.

One of the leading companies in this field is based in Hamburg Gossmann & Cie. Due to digitalization, he can accurately forecast future liabilities and risks in the years leading up to expiration, as founder and CEO of the company Arndt Gossmann explains in an interview with finews.com.

An ideal way to do this is to use the Legacy 2.0 digital insurance platform, developed with the Zurich-based software company. Deon Digital. It automates and streamlines processes with scalable, data-driven cloud software using Distributed Ledger Technology (DLT).

Digital backstop

“Legacy 2.0 is a paradigm shift when it comes to run-off insurance policies,” Gossmann explained. “The platform is the digital backbone of the company”.

The traditional insurance industry has enormous potential. According to PwC in its “Global-Run-off-Study 2021”, business volumes in Europe and the UK are expected to exceed $ 300 billion. Worldwide, total volumes are estimated at $ 900 billion, with an expected market growth rate of around 10% per year.

New investment class

Gossmann & Cie. Also launching Insurance Liability Management Fund (ILMF), as traditional insurance business is a new class of investment. It is extremely attractive in the current interest rate environment as it has an extremely low correlation with movements in financial markets or economic conditions of recession.

ILMF invests in investment firms whose policies are about to expire or have been transferred. The fund receives the premiums that the insurer pays to deconsolidate inherited assets and Gossmann aims to achieve low double-digit returns with it.

Zurich branch planned

“Reliable and accurate forecasts and the lack of correlation with external macroeconomic conditions are an important way to ensure the success of the portfolio and the fund,” explained the founder of the company.

Switzerland, with its high density of family offices, independent wealth managers and banks, is almost predestined to be a distribution point for such a product, explained Gossmann below and that is why he is considering opening a branch in Zurich this year.