Specialist Bermuda-headquartered insurance-linked securities management, servicing, transformation and fronting firm Horseshoe Group has had its license to operate in Gibraltar approved, meaning Gibraltar is now open for ILS business.
Gibraltar recently finalised and published its guidelines for insurance-linked securities (ILS), as a first step on the way to attracting ILS, catastrophe bond and collateralized reinsurance business to its shore.
As we said at the time, these new domiciles entering the ILS market with regulatory guidelines need to attract experienced service providers first to encourage issuers and ILS funds that the expertise required to operate there is adequate. Gibraltar has clearly attracted its first in the form of one of the most experienced ILS management and servicing firms in the market with Horseshoe Group.
Today Horseshoe Group has announced its expansion to Gibraltar with the establishment of Horseshoe Management (Gibraltar) Limited. The new Gibraltar arm will see Horseshoe act as an insurance manager for ILS, administrating, managing and servicing ILS vehicles for those seeking to use the domicile for ILS or catastrophe bond business.
The approval and formation of Horseshoe Management Gibraltar follows months of work alongside government officials, representatives of the FSC (Gibraltar’s insurance regulator), local service providers and notably a working group of leading ILS bankers, service providers, investors and sponsors put together by Horseshoe CEO, Andre Perez in conjunction with HM Government of Gibraltar’s Ministry for Financial Services. This working group helped the FSC to finalise their ILS guidelines, through a process of feedback and review, enabling Gibraltar to get set for welcoming ILS business in just four months.
Horseshoe Management Gibraltar aims to build on the global expertise of the Horseshoe Group in attracting European sponsors and cedants for ILS transaction structures such as catastrophes bonds, sidecars and collateralized reinsurance transformers.
Alongside an existing Dublin office, the Gibraltar arm of Horseshoe will strive to deliver superior insurance management services in another EU jurisdiction.
“The establishment of Horseshoe Management Gibraltar will now give us more flexibility to manage ILS transactions in either European domicile depending on the clients’ preference,” Andre Perez commented.
“At the moment, the ILS market is dominated by US Wind and Earthquake perils and for it to truly grow, it will have to not only expand the perils but also the geographical regions it covers. My sentiment is that a good percentage of the growth is going to come from Europe. This is why I am quite bullish about Gibraltar’s potential for ILS,” Perez continued.
Alongside its European operations Horseshoe Group is already established in the most prevalent ILS capable domiciles, with Bermuda its headquarters and an office in the Cayman Islands as well.
Brent Slade, COO of Horseshoe Group, told Artemis; “We believe Gibraltar will soon become the EU domicile of choice for European ILS issuance and has a bright future. At Horseshoe, we plan on continuing to build our presence in Gibraltar to facilitate, service, and enhance this business as it grows.”
Targeting Gibraltar shows that Horseshoe backs the way the ILS guidelines have been prepared by the domiciles financial authorities and feels confident that ILS business will be transacted and managed there, which bodes well for Gibraltar’s ILS ambitions.
Horseshoe contributed to the consultative approach taken by the Gibraltar Financial Services Commission (FSC) in defining its guidelines using a working group of industry experts. Slade explained; “Gibraltar has taken a collaborative approach with market leaders to establish a realistic and efficient framework of regulations for ILS that should make it the leading European domicile.”
Gibraltar’s Minister for Financial Services, Albert Isola MP, said; “I am delighted to welcome Horseshoe to Gibraltar following its regulatory approval by our Financial Services Commission. Andre and his team at Horseshoe have provided us with invaluable technical expertise and market knowledge together with the specialists in the Working Group that he coordinated and their decision to set up in Gibraltar is especially welcome. We are keen to establish Gibraltar as a European ILS jurisdiction and this is an important and significant next step.”
“Gibraltar has a lot going for it as a suitable ILS jurisdiction, aside from being an EU domicile, it has now a strong ILS regulatory and tax framework, a good infrastructure, competent service providers, Protected Cell Company legislation and more importantly the strong commitment from both Government and the FSC to make Gibraltar a thriving ILS European domicile,” said Andre Perez. “We are excited to have established a presence in Gibraltar with Horseshoe Management Gibraltar and we look forward to working alongside the collective willingness of those in Gibraltar to make ILS a success on ‘the Rock’.”
Perez said that the ILS guidelines that have been published by Gibraltar will make the domicile an attractive place to do business.
“The secret of a well thought out regulatory framework is efficient regulations which take into account business reality. This is even truer for ILS business. The fact that the FSC was receptive to the working group comments, while keeping regulations within the boundaries of EIOPA guidelines, was refreshing coming from a European regulator,” Perez explained.
Having two ILS capable domicile offices in Europe will benefit the Horseshoe Group, said Perez, giving choice to potential cedents or sponsors who want to keep their ILS structures domiciled in Europe.
“We are a licensed insurance manager in Ireland and do intend to maintain our license. I don’t see that changing. This is not too dissimilar to the fact that we are a licensed insurance manager in both Bermuda and the Cayman Islands,” Perez continued. “If anything, it will now give us more flexibility to manage ILS transactions in either European domicile depending on the clients’ preference.”
Gibraltar may have an edge on Dublin as an ILS domicile, as the regulatory framework has been designed with efficiency in mind and taking into account learnings from other domiciles. This could give Gibraltar an edge when attempting to attract sponsors to its shores.
Perez elaborated; “I think the Ireland and Gibraltar offerings are somewhat different. Traditionally ILS transactions in Europe have been done in Ireland as it was the only EU jurisdiction available. The problem is that the Irish regulatory system is viewed by some market participants as too cumbersome and antiquated for ILS transactions where speed to market and flexibility are essential. This is where I think Gibraltar is going to shine by having a more receptive and commercially based approach to regulation but also, thanks in part to the working group, having an ILS regulatory framework which better reflects the reality of this business.”
Gibraltar’s existing financial services legislation for captives and cell vehicles also places it in good stead to get a head start in the ILS space. “Furthermore, one of the major advantages of Gibraltar is that it has Protected Cells legislation already in place which brings a lot more flexibility to ILS transactions, especially Collateralized Reinsurance,” Perez explained.
Perez expects that Gibraltar will initially attract European sponsors to use its new ILS regulations, with catastrophe bonds likely the first structures to be seen.
“In the first instance, we expect that Gibraltar will attract Catastrophe Bonds from European sponsors. Eventually, I can see us doing Sidecars and Collateralized Reinsurance out of Gibraltar as well,” he said.
The addition of a new European ILS domicile, with efficient and up to date regulation, could help to encourage new first time sponsors to the market as well. Perez said he hoped that having an EU jurisdiction committed to ILS the market may see incremental deal-flow encouraged as a result. It may also result in existing European ILS sponsors electing to try Gibraltar as a new domicile for their ILS business, either for new transactions or by re-domiciling existing vehicles.