Lottoland adds new games, ILS coverage flexes to accomodate risk

by Artemis on October 20, 2017

Gibraltar based and licensed online lottery provider the Lottoland Group has expanded its offering with the launch of new technology for high jackpot instant win games which will all be backed by the firms insurance protection, including its fully collateralized insurance-linked security (ILS) arrangement.

lottery-ils-reinsuranceLottoland has launched what it is calling its Random & insured Number Generator (RiNG), technology that supports large instant win jackpots with all of the prizes covered by the company’s insurance infrastructure.

Use-cases of the technology include a €10 million scratchcard game, the highest jackpot prize for any instant win scratchcard game available. With such large prizes available to be won at any moment, it’s clear that the insurance backing and the firms collateralized reinsurance arrangement are key to enabling it to offer such gaming to customers.

New RiNG backed games will be available directly through Lottoland and also through its business to business arm, Lottoland Solutions which enables other companies to offer their customers games with the same jackpots at stake.

This further expands Lottoland’s portfolio of games, increasing the chances of jackpots being won and of course raising the risk that the firm needs to call on insurance and reinsurance to help it pay winnings to its customers.

But the recent ILS renewal, which saw the Fortuna collateralized reinsurance or insurance-linked securities (ILS) transaction renewed at an upsized EUR 120 million, included new structuring features that allow the coverage to be more flexible and to adjust to Lottoland’s needs, while also ensuring investors in the ILS are compensated for the risk they are taking on.

The Lottoland ILS transaction is structured to ensure that investors are only exposed to a certain level of risk throughout the lifetime of the transaction, no matter how quickly Lottoland continues to grow. It also allows for a regular reset, with a monthly calculations of premiums due and the risk to investors, so the ILS transaction can be reset regularly to ensure investors are compensated for any increase in risk.

The flexible reset of the Lottoland ILS allows for more premium to be paid to investors, to compensate for an increase in expected loss, or for expected loss to be controlled in another way such as an increase in self-retention levels under the deal.

The technology behind the new instant win jackpot games meant that it all of the prizes and jackpots under it can be covered by Lottoland’s insurance, including the ILS coverage which the company said stands “at the centre” of its risk transfer arrangements.

Lottoland’s CEO Nigel Birrell commented; “Leading betting operators already work with Lottoland Solutions to provide lotto betting services to their players. Now, all private and state operators offering casino-style, instant win and scratchcard gaming can work with us. We look forward to sharing this breakthrough combination of technology and insurance. It will enable the instant win gaming and younger generation lottery players to get access to high jackpot instant win games, whilst operators can freely decide which prizes they want to offer – we will provide the insurance.”

The flexibility of the ILS coverage means that Lottoland can continue to pursue growth, safe in the knowledge that its ILS transaction can continue to provide relevant coverage, while also helping investors to ensure they are getting what they underwrote and are compensated for any change in risk profile of the ILS deal.

Lottoland’s continued growth and its new B2B arm Lottoland Solutions mean that the firm is likely to continue to expand its collateralized reinsurance or ILS arrangement in years to come. As it expands the chances of a lottery cat bond being issued to back Lottoland’s expansion increase as well.

Something to watch out for at future renewals of this coverage, as Lottoland puts its newly established Fortuna insurance vehicle to greater use.

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