London steps closer to becoming alternative capital hub
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A U.K. parliamentary committee on Wednesday approved regulations aimed at establishing London as a center for the insurance-linked securities sector.
The approval of the Risk Transformation Regulations 2017 and the Risk Transformation (Tax) Regulations 2017 “implements a new regulatory and supervisory framework for Insurance Linked Securities in the U.K., designed to attract ILS business to the U.K.,” according to a British government briefing document.
The regulations create a new form of regulated activity under Britain’s Financial Services and Markets Act for ILS and they allow the creation of protected cell companies “to act as a special purpose vehicle in ILS transactions,” the briefing document said.
According to the government document, the new regime “makes provision for a bespoke regulatory and supervisory framework for ILS business in the UK,” and “Use of ILS has grown very significantly in recent years and is now an established part of the global reinsurance market. ILS or alternative reinsurance capital now stands at around $70 billion, about 12% of overall reinsurance capital and continued rapid expansion in this business suggests that it will continue to grow in importance.”
Some see great potential in the London market for ILS business.
“The news that the regulations have been approved is a great step forward,” William Hogarth, Legal Director at Clyde & Co L.L.P. in London said in a statement. “London is in a strong position when it comes to attracting ILS business as it is home to some of the world’s best and brightest insurance talent.”
The approval of the regulations could mean more competition for Bermuda as a hub for ILS activity.
Although, “A key sticking point is likely to be the speed-to-market facilitated by the efficiency of regulatory approvals,” Mr. Hogarth said, “If London can genuinely compete with the established ILS markets in this space then the sky is the limit for the U.K. to become a hub for ILS business.”
