UK Government to welcome ILS investors to Downing Street

by Artemis on March 22, 2018

The UK Government is set to welcome a group of insurance-linked securities (ILS) investors to Number 11 Downing Street next week, the home of the Chancellor of the Exchequer, as it looks to set out its support for the sector and encourage investors to consider allocating to UK ILS opportunities.

UK flagThe meeting comes as the UK continues its push to bring a greater share of ILS business to the country, following the enactment of a new insurance-linked securities (ILS) regulatory and tax framework.

The first transaction has already been completed under the UK ILS framework, but the Government is keen to see more activity and hence the weight of the cabinet is being thrown behind efforts to encourage investors to look to the UK as an ILS option.

Economic Secretary to the Treasury, John Glen MP, commented that the Government, as well as encouraging fintech opportunities, is also looking to help, “the more traditional parts of our financial services industry to take full advantage of evolving markets.”

One of the areas of focus for the Government has been the UK ILS regulatory regime, as an initiative to help the traditional London insurance and reinsurance market expand and make the most of the groundswell of interest in ILS, and while the regulations are now in-force and available for use that focus has not lessened.

Glen explained, “The Treasury, regulators and the market have worked together to create legislation for a new UK regime for insurance linked securities (ILS). This enables London reinsurers to undertake ILS business in the UK and participate in a rapidly growing global ILS market worth over $90bn.

“Without the framework in place, UK reinsurers were being held back from offering the fullest range of products to clients, despite all the expertise we have to offer.”

Traction has now begun to be seen, with the first UK ILS transaction from Neon and other parties including Pool Re and Beazley both said to be looking at the UK regs as a structure for transferring risk to the capital markets.

The Lloyd’s insurance and reinsurance market is also looking to ILS as a potential protection buffer for its all-important Central Fund, which likely puts the UK ILS regime as a likely candidate should Lloyd’s pursue an issuance anytime in the future.

“I was delighted to see the first ILS deal agreed within two weeks. There are now other ILS vehicles in the pipeline and I am confident that the market will continue to grow,” Glen continued, saying that, “To celebrate, the Chancellor and I will be welcoming international ILS investors to London this month and we will encourage them to bring their capital to the UK.”

“We have a long history of innovating and adapting as the world around us changes. Our strengths of financial and intellectual capital make us ideally placed to continually innovate to meet customers’ requirements and an open partnership between industry and government will ensure we do just that,” Glen said.

By opening and keeping a dialogue flowing with investors, to explain the options now available to the ILS industry within the UK, it stands to reason that transactions will begin to flow in the country and it will take a slice of ILS market deal-flow.

Encouragingly for ILS investors, much of the discussion on the use of the UK’s new ILS structure appears to involve new ceding companies, new risks and opportunities, not duplicating or taking away from the ILS activity they invest in elsewhere.

It is to be hoped that by having more opportunities for where to transact, place and invest in risks it will foster further ILS market growth, which will meet the mandate of the UK Government of attracting new business and innovation to its shores.

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