Insurance-linked securities (ILS) business is seen as a priority in a post-Brexit Britain by the new UK Government cabinet, and the new regulatory regime will be in place in the first-half of 2017, according to government speakers at an event in London this morning.
The UK ILS regulation consultation period, which is currently underway after the draft regs were published in November, represents an “enormous opportunity” for the marketplace, according to speakers at the event, and with regulations set to be in-force during H1 2017 UK ILS transactions could be undertaken as early as the mid-year 2017 reinsurance renewals.
In the wake of the Brexit vote the UK government has seen considerable change in the form of a new Prime Minister and a largely new set of cabinet ministers, but the work to position London and the UK as a leading ILS domicile and home to ILS business remains a priority.
Following the Brexit vote to leave the EU there has been considerable uncertainty about London’s future as a global financial market hub (including for its insurance and reinsurance sector), so the ILS regulatory work and effort to bring some ILS transactions to London is seen as a positive initiative.
Speaking at City & Financial’s ILS conference in London this morning Lee O’Rourke, Head of the Insurance Linked Securities Project at HM Treasury, explained that “the new cabinet regards ILS as a priority, particularly in post-Brexit Britain.”
O’Rourke said that after the consultation period the regulations will be put before the UK Parliament as early as February or March 2017, with the new regulatory regime for ILS set to commence in the first-half of next year.
With the regulations set to be brought into force that quickly the ILS market would be well-advised to get their feedback into the Treasury as part of the consultation on the currently proposed set of regulations.
Michael Wade, a Senior Advisor with the UK government’s Cabinet Office, told the event in London today that the ILS and reinsurance industry needs to be “robust” in requesting precisely what is required to make London and useful ILS transactional hub, adding that the consultation presents the ILS and reinsurance market an “enormous opportunity.”
This is true. The chance to drive the direction of the UK ILS regulations should not be passed on, as there is a desire in the UK government and the London insurance and reinsurance market to bring something unique, useful and incrementally beneficial for the market into being with the ILS regulations.
Simon Kirby, Economic Secretary to the Treasury (City Minister) at HM Treasury, added his weight to the push for robust feedback, saying that the government is listening to and welcomes contributions from the market, noting the importance of getting the ILS regulations right.
Kirby said that the government cares about doing what it can to help bring an innovative ILS regime to the UK in order to foster further ILS market growth.
It’s encouraging that government representatives are so positive on the ILS market, see it as a priority for the UK and want to encourage a constructive feedback debate on the regulations to ensure they add value and help the market to grow.
There is also an element of wanting to maintain a level playing field and of course with Brexit a cloud over the London insurance and reinsurance market ILS is seen as an innovative area of the market that London has perhaps lagged behind previously.
Of course getting robust regulations in place that foster ILS innovation is just part of the battle, the real work will begin when the regulations are passed by Parliament and we see just what attraction London and the UK has for the ILS market.