First UK collateralised reinsurance PCC encouraging to see: LMG

The London Market Group (LMG) said that it is encouraged to see the successful registration and launch of the first UK domiciled protected cell company (PCC) for collateralised reinsurance, as this is seen as the likely driver for future ILS market expansion.

As we reported yesterday, specialty insurance and reinsurance firm Brit Ltd. is the first to successfully register and get licensed a multi-arrangement collateralised reinsurance PCC vehicle in the UK, with the launch of its Sussex Capital UK PCC Limited.

The ILS vehicle is the first multi-arrangement insurance special purpose vehicle (m-ISPV) to be approved under the UK’s new Risk Transformation Regulations and so represents another landmark for the UK’s ambitions to play host to ILS transactions and structures.

Commenting on the news Malcolm Newman, London Market Group ILS taskforce Chairman, said, “It is very encouraging to see Brit pioneer this structure in London using the UK’s ILS legislation. They and the PRA are to be congratulated on reaching this milestone in the development of the UK’s ILS market.”

Brit expects to use the new Sussex Capital UK vehicle to underwrite collateralised property catastrophe reinsurance for multiple cedents accessed through its distribution network in the London market and funded by capital under the management of Sussex Capital’s Bermuda domiciled ILS funds.

Newman also recognised that it is likely to be collateralised reinsurance where the biggest opportunity lies for the UK, in terms of playing host to ILS transactions.

“The continued growth in the ILS market will increasingly come from collateralised reinsurance utilising the PCC structure and Brit have now demonstrated that this is possible from London,” he said.

So now the UK has a collateralised reinsurance sidecar structure in the NCM Re vehicle from Neon which is currently aiming for a renewal for year-end we understand, a catastrophe bond in SCOR’s Atlas Capital UK 2018 PLC transaction, and now a multi-use collateralised reinsurance transformer in Sussex Capital UK.

Those are the three main structural use-cases for the new UK’s new ILS regulations and with all three now having been successfully set up and used it’s now a case of others coming forwards to domicile their own ILS activities in the United Kingdom and the country has clearly demonstrated that it is a viable option for ILS issuers, sponsors and facilitators.