Lottoland sets up Fortuna Insurance PCC in Gibraltar

by Artemis on September 25, 2017

Gibraltar licensed online lottery company the Lottoland Group has set up its own insurance company in Gibraltar, Fortuna Insurance PCC Limited, which will provide the firm with its own issuing vehicle for future collateralised reinsurance and insurance-linked securities (ILS) transactions.

lottery-ils-reinsuranceLottland recently renewed its Fortuna collateralized reinsurance or insurance-linked securities (ILS) transaction at an upsized EUR 120 million, the largest such reinsurance deal in gaming industry history. The two-year deal will now be transferred to sit under the new Fortuna Insurance PCC company.

Lottoland has now been granted an insurance licence by the Financial Services Commission (“FSC”) of Gibraltar, under EU insurance legislation with the newly registered Fortuna Insurance PCC Limited now a subsidiary of Lottoland Holdings Limited.

Lottoland is the only online lotter provider to have set up its own insurance company.

Lottoland CEO, Nigel Birrell, commented; “The fact that Lottoland is the first and only company in the gaming sector to have done this, highlights our commitment to industry best practice and transparency. This is huge step forward not just for Lottoland but also for the gaming industry.”

The new insurance company will underwrite all of Lottoland’s bookmaking and lottery jackpot risks, providing it with an interface to the global reinsurance and ILS markets for when it needs to lay off risk to third-parties as well.

Fortuna Insurance will be regulated by the FSC in Gibraltar and the European Insurance and Occupational Pension Authority (EIOPA), ensuring that it will be compliant with the Solvency II regulatory regime. The Fortuna insurance company will also have a board and management team consisting of five people with expertise across insurance and reinsurance, financial markets, regulatory as well as gaming.

Lottoland calls the move a “historic milestone” for the company. The lottery firm taps both the traditional reinsurance and ILS markets for coverage and in future owning Fortuna Insurance should enable its access to risk capital markets to be more direct, efficient and likely lower cost as well.

Fortuna Insurance has top ILS investment managers and rated reinsurance companies as its counterparts currently, which Lottoland highlights as adding to “the robustness of its insurance.”

“It is this structure that gives Lottoland flexibility to innovate driving higher value and jackpots for its customers and investors while always ensuring they can pay-out on all prizes in a timely manner,” the company explained.

Lottoland’s risk transfer has already demonstrated its value to the firm, paying out for a number of jackpot wins, the largest of which was €22 million won by a player from Berlin in 2016.

The company believes that Fortuna Insurance will offer it “even more flexibility to innovate and offer new games to players.”

Additionally, Lottoland’s B2B offering, where other brands can white label its lottery games, will have all of its pay outs guaranteed through Fortuna Insurance.

Fortuna Insurance PCC will be able to cede risks to both ILS investors, acting as a transformer type vehicle, plus traditional reinsurance markets and could perhaps even be used for a catastrophe bond like issuance in future as well. As Lottoland’s business grows, it is set to require an increasing pool of risk capital to back underwrite the risks of large lottery jackpot pay outs.

Lottoland has cleverly tapped the risk transfer markets, including the capital market investors in ILS, to help it to offer more games, expand its number of players, increase its jackpots and offer these B2B solutions as well.

By ensuring efficient access to risk capital Lottoland will hope to continue its expansion, with the ILS and reinsurance markets set to play a key and now more direct role via its Fortuna Insurance PCC vehicle.

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