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English Channel island Guernsey has created a financial structure that is both a licensed insurance company and a regulated investment fund, according to a statement Monday from Guernsey Finance LBG, the promotional agency for the island's finance industry, which is a joint industry and government initiative.
The hybrid vehicle for use in the insurance-linked securities sector will lead to increased simplicity and efficiency for ILS fund managers, according to Christopher Anderson, a partner with law firm Carey Olsen (Guernsey) LLP, who created the concept with the support of the Guernsey Financial Services Commission, the statement said.
The existence of a protected or incorporated cell company that is both a licensed insurance company and a regulated investment fund means ILS managers will no longer have to 'rent' cells of protected cell or segregated account companies to act as special purpose insurers, the statement said.
"For the first time, the Guernsey hybrid provides managers with the opportunity to operate an investment fund and any number of subfunds and SPIs in one place, supervised by one regulator, governed by one board of directors with one set of service providers and one auditor,” Mr. Anderson said in the statement.
The new structure will include both investment cells that raise money from third-party investors through the offer of shares or other securities as well as insurance cells that write insurance and reinsurance contracts, the statement said.
The funds raised in the investment cells can be used to collateralize insurance and reinsurance written by the insurance cells under a single board of directors with overall responsibility for the operation of the hybrid, which may appoint an external ILS fund manager or adviser, if desired, the statement added.
"Guernsey will continue to be at the forefront of innovation in ILS, and this is a perfect example of forward-thinking,” Guernsey Finance Chief Executive Dominic Wheatley said in the statement. “This thinking builds on Guernsey’s expertise in insurance and ILS and in funds, where we are global specialists in private equity, listed debt and alternative assets, and should lead to Guernsey becoming a natural choice for ILS managers to establish a fund.”
The number of international insurance entities, including captive cells, licensed in Guernsey increased to 804 at the end of 2015 compared with 797 in 2014, according to statistics from the Guernsey Financial Services Commission.