Gibraltar to target catastrophe bond and ILS business

by Artemis on February 20, 2014

Gibraltar is the latest domicile which, having noticed the burgeoning interest in insurance-linked securities (ILS) and the growth of the catastrophe bond market, is actively looking to target cat bond and ILS business and encourage it to Gibraltar.

Gibraltar is a British Overseas Territory located at the southern tip of Spain near the entrance to the Mediterranean. It already has an active financial sector, with insurance businesses, hedge funds and offshore banking services working from the domicile.

The Gibraltar insurance sector saw gross premium income for its companies in 2012 of over £3.8 billion, and the domiciles motor insurers head a 16% share of the UK motor insurance market that year.

After the active year in the catastrophe bond market and the increasing interest in insurance and reinsurance linked investments Gibraltar has clearly seen an opportunity to try to attract some of this business to its financial hub and is seeking to become a jurisdiction for insurance-linked securities in the European Union.

Gibraltar already has legislation in place which will support the needs of many ILS and cat bond issuers, such as its Insurance Companies (Special Purpose Vehicles) Regulations 2009, which the Government of Gibraltar expect to be the primary legislation to support its entry into the ILS market.

Gibraltar also has protected cell company legislation, through its 2001 Protected Cell Companies law, which will also be a part of its ILS efforts. Protected cell companies have driven much of rival domicile Guernsey’s success in ILS over recent years.

Gibraltar’s Financial Services Commission and a number of legal and accounting firms recently received ILS training from Aon’s Director and Global ILS Practice Leader Liz Frederick. Frederick, based in the Cayman Islands which is another ILS domicile, has worked with other insurance regulators on developing ILS business.

Albert Isola, Minister for Financial Services in Gibraltar, commented; “The Gibraltar insurance industry has grown significantly over the past ten years, in particular the motor sector. We are very proud of the progress that has been achieved and we are keen to develop other and complementary areas of insurance. We believe that insurance linked securities offer one such opportunity.”

Of course Gibraltar will face competition from Bermuda and the Cayman Islands, which are the two most established domiciles for ILS and catastrophe bond business, as well as Guernsey which is quickly developing as a hub in Europe and Malta which has recently enacted legislation to support ILS.

Choice is good though. The more domiciles which can support ILS and cat bond business the more competition there will be and the harder domiciles will have to work to attract the market. This will create innovation and force domiciles to develop new and complementary offerings which may help to stimulate further ILS market growth.

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