Run-off may be one of the less fashionable aspects of the insurance industry — but there's real money to be made for capable operators with the necessary expertise.

That is reflected in the success of Bermuda-based Enstar Group Ltd., the world's biggest company solely dedicated to the run-off business.

The company's total assets have more than tripled over the past five years to end 2009 on $4.2 billion. Over the same period shareholders' equity more than quadrupled to $801 million.

The company sailed through the worst financial crisis in more than 60 years with barely a blemish on its financial results. Its net earnings were $62 million in 2007, $82 million in 2008 and a record $135 million last year.

Enstar's roots lay in a company called Castlewood Ltd., founded in 1993, by three men who saw the opportunities in the largely ignored reinsurance run-off niche.

Enstar's current chief executive officer Dominic Silvester was one of them, along with current joint chief operating officers Paul O'Shea and Nick Packer.

In 2000, Castlewood entered into a three-way joint venture with US-based Enstar Group and the Trident II fund. That gave Castlewood, then renamed Castlewood Holdings Ltd., increased financial clout in its efforts to acquire and manage companies in run-off.

In 2007, Castlewood merged with Enstar and took on the Enstar name. Enstar trades on the Nasdaq and has a market capitalisation of more than $930 million.

The company has evolved into an entity with a global staff of 290, including a workforce of 31 at its Bermuda headquarters on the third floor of Windsor Place in Queen Street, Hamilton.

Staff turnover is low and several of the people who started with Castlewood in the 1990s are now with Enstar, some of them working in the company's offices in Australia, the US or the UK.

An insurance company or segment of a company goes into run-off when it ceases to write new business and is managed to deal with its continuing obligations, in particular claims from policyholders.

While many of the run-off headlines are claimed by companies that have folded, much more of the run-off business emanates from thriving companies discontinuing a segment or a line of business.

"The majority of our business is from big, healthy companies who want to take a change of direction or they don't want to be in a particular business any more," Mr. O'Shea said in an interview.

"There are hundreds of millions of dollars of run-off business out there. The run-off providers are very useful to the big blue chip players and they are starting to use them more and more. Some of the bigger deals we have done recently have been with Travelers and AMP, a huge Australian financial corporation.

"We have a proven track record and reputation and a very good team of people — in this business, you're only as good as your people."

Performing due diligence on potential acquisitions is one of the most important parts of Enstar's operations and it has built up considerable expertise to do that. The skilled personnel include in-house actuaries, lawyers and claims experts, who run over a target with a fine tooth comb to assess its true value.

The challenge is to pay a purchase price that leaves room for Enstar to make a profit on managing the loss reserves its acquires through the deal.

Sometimes they can cut the waiting time for business to run off through commutation of reinsurance contracts or policy buybacks in insurance. In effect, they pay policyholders to terminate policies early for a price.

"That's like underwriting with hindsight," Mr. O'Shea said. "It's a very sophisticated business and you can't pull the wool over anybody's eyes in the negotiations."

So far the Enstar experts have been getting their sums right. Enstar Group, through its subsidiaries has acquired 28 insurance and reinsurance companies and is now managing them in run-off.

Its biggest and toughest competitor is the insurer with the best credit ratings in the world and $131 billion in shareholders' equity, Berkshire Hathaway. It is by far the biggest player in the run-off business. Enstar is at number two and is far ahead of its nearest pursuer.

"Maybe 40 percent of the companies we bid on, Berkshire Hathaway bids on too," Mr. O'Shea said. "Our record against them is probably about 50-50."

Every acquisition that Enstar makes has to be cleared by the regulator, whether it is the Bermuda Monetary Authority (BMA) or the Financial Services Authority (FSA) in the UK. Should the company "drop the ball" once, it could be very difficult to get approval again, Mr. O'Shea said.

There is plenty of room for expansion for run-off service providers. A report published by PricewaterhouseCoopers last month estimated that the size of the non-life European run-off market alone to be around 205 billion euros ($278 billion). The entire global run-off run-off market could be worth something like $800 billion, Mr. O'Shea estimated.

In terms of capital providers and expertise, Enstar is well equipped to grow, he added, and the company is well pleased with Bermuda as its corporate home.

"I've been in Bermuda since I came here to work for KPMG in 1982 and the company's been based here since Castlewood started up in 1993," Mr. O'Shea said.

"We have a good relationship with the BMA — which does its job very efficiently and I think is a silent asset for Bermuda — and the tax benefits of being here are significant.

"Also, most of the people have worked with us here for a long time and they have the skill sets we need."