Another offshore domicile has thrown its hat into the ring to compete for catastrophe bond and insurance-linked securities (ILS) business. Puerto Rico is reportedly the latest domicile to amend its insurance legislation in an attempt to bring the ILS sector to its shores.
According to this article in Captive Insurance Times the Puerto Rican government has enacted legislation allowing catastrophe bonds and other insurance-linked securities (ILS) to be issued and domiciled there.
Several amendments have been made to the insurance legislation to allow this, including changes to the definition of an insurer and the creation of a new ‘Class 6’ of insurance company which would have the authority to issue cat bonds or ILS. We assume that this is the Puerto Rican equivalent of a special purpose reinsurance vehicle.
The article says that the commissioner of insurance Angela Weyne is hopeful that ILS issuers will take advantage of the new legislation that has been enacted.
Puerto Rico will find stiff competition for catastrophe bond and ILS business, not just from the most established insurance domiciles in ILS, such as Bermuda, the Cayman Islands, Dublin and Guernsey but also from Gibraltar and Malta which are also targeting the sector.
For new domiciles targeting the ILS space there is a strong need for local service providers to be in place before the market will take its business to their shores. Local service providers, particularly on the legal and management side are essential to ensure regulatory requirements are met.
Puerto Rico may find itself with work to do before it can attract ILS or cat bond business, with other domiciles already active or trying hard to become active in the space. However there is room for choice and if Puerto Rico can create a robust legislature for special purpose reinsurance vehicles, attract service providers to its shores and provide the flexibility that issuers want then it will stand every chance of attracting ILS business in the future.
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