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ILS business could transact in London from January 2017 – LMG’s Newman


The UK Treasury continues to target having its insurance-linked securities (ILS) legislation completed and passed by government for the end of this year and the London ILS initiative led by the LMG continues to aim for ILS business to be conducted in London from January 1st 2017.

London and the UK have been working towards creating a regulatory environment that will make issuing ILS transactions attractive. The initiative involves many actors, with the aim being to create an ILS or collateralised reinsurance structure, for the London market, which is efficient, in terms of set-up speed, frictional effort, taxation and of course also cost.

The UK government Treasury department published amendments to a financial services bill which would allow for a reinsurance transformer vehicle to be established. Feedback has been sought on this and other proposals from the LMG and the volume of responses has been significant, according to the LMG.

Speaking to Artemis, Malcolm Newman of the London Market Group (LMG) said that both the number and the detailed nature of responses has meant that the Treasury has its work cut out to analyse and frame an appropriate response back to the market itself.

Newman said that he sees this as positive, as it shows both that there is considerable interest in the London ILS project initiative from the market, with a number of London market companies planning to participate in an onshore ILS market as soon as it is available.

“We are very pleased that the market gave such a comprehensive response to the Treasury’s consultation on ILS. This demonstrates that we are moving in the right direction with this initiative, and that there is real interest. However, it does means that it will take longer for them to analyse the replies,” Newman told Artemis.

The detailed nature of the responses and the process being undertaken to create an ILS structure for the London market is encouraging, as it suggests that both the ILS or reinsurance market and the government are fully-engaged in the initiative, and that the end result may be something more compelling.

The detailed response has slowed down the process a little, Newman indicated, but it should not take the process off its timetable and the end of the year is still being targeted for completion of the legislation.

“We still hope that legislation will pass in 2016, meaning that from 1 January 2017 ILS business will be possible in the UK,” Newman explained.

It’s encouraging that the feedback from ILS and London reinsurance market participants has been detailed and thorough, as it should result in a structure being created in London that is efficient, useful and provides a clear need within the ILS market today.

In this way it would likely also be complementary to other ILS domiciles, as it is unlikely market participants would push for a replica of a structure that can be as efficiency elsewhere.

So fingers are crossed for a truly innovative London ILS structure to emerge in time for the January 2017 reinsurance renewal season. It’s still a tight timeline, but if the legislative process does not hold it back we could see insurance-linked securities transactions taking place in London within a matter of months.

Read some of our other coverage of London’s journey to become an ILS hub:

Efficient ILS structure will help secure London’s future: Beale, Lloyd’s.

LMG welcomes start of UK gov’s ILS legislative process.

UK drafts beginnings of ILS framework, starts with transformers.

London LMG looks to innovate on equal reinsurance credit for ILS.

Attracting ILS & cat bonds will be challenging for London: Report.

London re/insurance market needs true innovation: DAC Beachcroft.

Collateralised reinsurance focus for London (LMG) ILS task force.

London has to fight its corner on ILS: Michael Wade, Cabinet Office.

London ILS task force participants revealed, holds first meeting.

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