Run-Off Doesn’t Mean Walk Away: Why Legacy DA Books Need Rigorous Audit Support

From an auditor’s perspective, run-off is often where the true quality of a delegated authority arrangement is revealed. While much of the focus in active binders is on underwriting discipline and growth, the run-off phase strips a portfolio back to its fundamentals namely claims handling, data integrity, and governance. It is also the point at which oversight can inadvertently weaken, precisely when it is needed most.

At its simplest, run-off begins when a binder expires or is terminated and no new business is written. However, in practice, we see two distinct scenarios, each presenting different audit challenges. In the first, the MGA or coverholder continues to trade, albeit without that specific capacity. In the second, the entity exits the market altogether, leaving the insurer either directly or via a third party to manage the legacy portfolio.

Where the coverholder remains in operation, one of the key audit considerations is prioritisation. Our experience shows that, understandably, focus shifts towards new business opportunities and new capacity providers. The legacy book can become secondary and shouldn’t.  From an audit standpoint, this raises immediate questions around service and whether service levels are being maintained and sufficiently expertise is being made available. In these situations, any audit approach must pivot away from the traditional underwriting focus and towards operational performance. Claims handling and customer feedback and complaints necessarily become the central lens of the audit. With any review focusing not just on technical accuracy, but consistency, timeliness, and adherence to agreed authorities. Leakage risk whether through poor reserving, weak negotiation, or inadequate oversight of third parties, tend to increase in run-off if not actively managed. And the role of the auditor is to identify where those risks are emerging and whether the controls in place remain fit for purpose.

The second scenario where the MGA is no longer trading introduces a different dynamic. Here, the audit focus often begins with transition. Form a best practice point of view typically we are asked to review how the portfolio is being handed over: whether data is complete and reliable, whether documentation is accessible, and whether there is sufficient continuity of knowledge. Gaps at this stage can have long-lasting consequences. If key information is lost or misunderstood, the impact can be felt across the lifetime of the claims. Once transition is complete, the audit emphasis shifts again, often towards the capabilities of the receiving party be that the insurer or a specialist run-off provider. Do they have the expertise to manage the class of business? Are governance structures clear? Is there appropriate oversight of outsourced services? These are not theoretical concerns; they go directly to the insurer’s ability to control ultimate outcomes.

Across both scenarios, one area that is sometimes overlooked is renewals. Even in run-off, there may be policies eligible for renewal under a new arrangement. From an audit perspective, this creates a point of potential inconsistency. We look closely at how renewal decisions are made, how customers are treated, and whether there is clarity and fairness in communication. Misalignment here can create both conduct and reputational risk. Another consistent theme encountered is the deterioration of data quality over time. Bordereaux may become less timely or less complete. Systems may be decommissioned or deprioritised. Key individuals who understood the nuances of the portfolio may no longer be available. As auditors, we place significant emphasis on testing data integrity and the robustness of reporting, as these underpin all effective oversight.

Perhaps most importantly, run-off exposes questions of accountability. Who “owns” the book? Who is ultimately responsible for decisions, performance, and outcomes? Where this is unclear, risks tend to crystallise. A rigorous audit will always seek to establish whether governance structures remain clear and effective, even as the portfolio winds down. The overarching point is this: run-off is not a passive phase. From an audit standpoint, it requires a deliberate shift in focus, a redefinition of scope, and often a different skill set. It demands attention to detail, an understanding of long-tail risk, and a willingness to challenge assumptions that “nothing is happening” simply because no new business is being written.

In our experience, the best-managed run-off portfolios are those where carriers remain actively engaged and where audit is used as a tool to maintain discipline and visibility. Run-off does not mean walking away, it means asking different questions, looking in different places, and maintaining the same rigour that was applied when the business was first written.