The head of the US insurance watchdog for the state of Iowa put the wind up a panel of experts last week when she questioned reinsurance lawyers and accountants on why business needed to be put in run-off and pointed to the risks it posed.

Therese Vaughn, Insurance Commissioner for Iowa, put the panel of experts on the spot by stating that putting a company into run-off will not solve the problems in the insurance industry in the long term and only put off difficulties that will have to be faced at a later date.

At the Hawksmere 17th International Reinsurance Conference, a panel of four reinsurance lawyers and accountants gave an update on the current developments in exit strategies, and ways to get rid of unwanted lines of business.

Paul Evans, partner at PricewaterhouseCoopers in the UK, Robert Barclay, Renaissance Capital Partners Ltd., in the UK, Franck Ray counsel at Hinckley, Allen & Synder, and Stephen Schwab, partner at Piper Rudnick were on the panel which dealt with in-house and outsourced run-off, loss portfolio reinsurance, sale, solvent schemes and regulatory issues in both the US and UK.

But, Dr Vaughn, who was in the audience, questioned why so much business was being put into run-off in the first place.

"I am struck by the comments that this is going on more and more and there are even seminars dedicated to it," said Dr. Vaughn.

"One of the questions I have is what are the long term effects on the industry? If you separate out this business because it is higher risk... but it is still there and down the road, 20 years away what happens?"

Mr. Barclay said: "What I would like to think of it as is accelerated settlement. The primary insurance people got paid and run-offs don't last forever. I believe this is a positive and not a negative."

He said that it was an obvious fact that it was better to bring a run-off to and end rather than have it drift into insolvency.

Mr. Barclay added that one of the things not given enough weight was the amount of capital that having a business in run-off takes up as huge reserves to meet liabilities is not enough.

Dr. Vaughn added that she understood that it was a very complex issue and that it was taking up capital. But she questioned taking something of a higher risk and separating it from the parent company and the rest of the risk taken on.

"It is concentrating risk and in the that is something the industry in the long term is going to have to deal with," she said. "Why is so much going on."

Mr. Evans said that toxic tort, asbestos, 9/11 and the professional indemnity crisis of the 1980s and 1990s all had produced a weight of claims and had led further down the line to reinsurance problems.

"These problems are not going to go away," he said.

Mr. Ray said that many insurance companies had been able to rely on investment income while much of the bad business was affecting their core operations.

"Now there is retrenchment and companies have decided to close down areas of their business," added Mr. Ray.

Mr. Schwab said that toxic torts had caused much of the problems and legislation was needed to stop juries awarding such high payments. "Companies need to maintain a profitable enterprise and to maintain and enhance their position," he said.

Mr. Evans added that Tort Reform was necessary. He said courts had become "creative at pointed a loaded gun at the insurance industry" and change was needed to halt this.