Collateralised ILS deal gives Lottoland scope to expand to B2B

by Artemis on October 26, 2015

Lottoland Group, a fast-growing Gibraltar licensed online lottery provider, says that its €100m lottery winning risk collateralised reinsurance transaction provides it with the security to be able to expand its products on a business to business basis.

Lottoland is the first and only betting provider to tap into the insurance-linked securities (ILS) market for a source of insurance protection using a European domiciled vehicle. The transaction, dubbed Fortuna by inea GmbH, the German firm that structured this ILS investment opportunity, is the first ILS style reinsurance deal domiciled in Gibraltar.

The Fortuna deal is a pure collateralised reinsurance transaction providing €100m of annual coverage, including reinstatements to Lottoland. The transaction was structured into four distinct layers, with differing levels of winnings required to cause attachment of each.

With this source of protection in place, Lottoland said that it feels more secure to expand its business model into the B2B realm, providing its lottery jackpot offerings as a service through a new Lottoland Solutions group.

“What we have with this sector is something that’s very new and pioneering and that’s an exciting thing to be involved with,” commented Glen Bullen, a recent hire who will head up Lottoland’s B2B offering.

The protection that the ILS transaction affords will enable Lottoland to provide jackpot services to those wishing to offer lottery gaming to their customers, safe in the knowledge that it has insurance to protect against the risk of large winnings occurring.

The Lottoland transaction is a great example of an ILS structure, collateralised reinsurance in this case, providing a company with insurance protection and the security to expand its business. The flexible way ILS can be structured makes them a useful risk management tool, both for the protection and for the payouts, as well as for the confidence a well-structured insurance protection can provide.

For corporate sponsors, having insurance in place can give the comfort and security to expand and grow, as we see here with Lottoland. For certain complex corporate risks an ILS transaction, or even a catastrophe bond, may result in coverage that is more flexible and perhaps cheaper than traditional re/insurance companies can provide.

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