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ILS a glittering prize, London should not surrender it: LMA/Vario Partners


As the insurance-linked securities (ILS) industry continues to expand its remit and share of the global re/insurance market, London must respond to the opportunity through investment in innovation and by leveraging its expertise, talent and location, according to market experts.

Tower Bridge, LondonOrganised by the Lloyd’s Market Association (LMA) and Vario Partners, a number of ILS industry experts recently took part in a panel discussion at Lloyd’s of London around London’s ambition to become a global leader for ILS business.

Panel speakers, the LMA and Vario Partners, underlined London’s position as an international hub for insurance and reinsurance business, but did highlight a need for the city to catch up with other domiciles when it comes to ILS.

“London needs to respond and not completely surrender the large and growing ILS insurance segment to other competing domiciles, but to use its underwriting, capital markets and asset management skills and concentration of expertise to build its own distinctive place in this market,” said the follow-up statement from the panel discussion at Lloyd’s.

ILS, said the statement, “represents a glittering prize for London,” and while the UK government’s proposal to introduce ILS regulation is ongoing, despite being put-back by Brexit and the recent snap election, “it will need individual insurers, reinsurers, ILS funds and consultants to also invest in this area and this will need to be supported by regulators and market organisations.”

The panel was chaired by Bryan Joseph of ILS specialist firm, Vario, and included Rob Procter, Investor, Securis Investment Partners; Rajiv Punja, Underwriter, Arcus Syndicate 1856; James Slaughter, ILS sponsor, Liberty Mutual and; Des Potter, ILS structuring, Guy Carpenter Securities.

London and the Lloyd’s market is home to a wide range of insurance and reinsurance industry expertise and talent, with access to talent often being a reason companies look to establish themselves in London.

But despite all the positives offered in London and Lloyd’s, for ILS business to flourish the panel highlighted some of the “archaic processes and accounting rules” at Lloyd’s, which make it difficult for ILS investors to operate in the space, especially when compared with other domiciles.

The cost of doing business in London, when compared with other regions, was also highlighted as a barrier by the panel, as was the need for London’s ILS business to innovate, and not simply be another ILS domicile looking to compete just on price.

In fact, the panel highlighted London’s unique reputation for innovation, and its location, as qualities that can be leveraged to develop an ILS hub that boasts innovative products that offer clients greater value.

One way this can be achieved is through the creation of innovative solutions outside of the property catastrophe space, explained the panel.

In fact, according to a survey completed by event attendees, many see the development of solutions outside of the property catastrophe space as an opportunity for the marketplace. With 80% of survey respondents feeling that ILS is an opportunity for the Lloyd’s market.

The statement concluded; “ILS represents a glittering prize for London. More companies need to embrace its potential through innovation and new product development. These must exploit the existing strengths of the London market and build on its reputation as an innovator in (re)insurance underwriting and fund management.”

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