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Lloyd’s ILS platform to reduce frictional cost of investor access: Clifford Chance


London Bridge Risk PCC Limited, the newly established insurance-linked securities (ILS) vehicle sponsored by Lloyd’s, will “reduce the frictional costs and time” required for ILS investors to access the returns of the insurance and reinsurance market, law firm Clifford Chance has said.

lloyds-london-buildingLondon Bridge Risk PCC Limited, is a newly established UK domiciled Multi-arrangement Insurance Special Purpose Vehicle (mISPV), which has now been approved by regulators for use by Lloyd’s.

Designed to help investor capital be channelled to support member funds at Lloyd’s, while the structure is not set to be used as a typical collateralised reinsurance transformer (for now anyway), it should make it simpler for investors looking to access the returns of the Lloyd’s market’s underwriting.

Clifford Chance advised the Society of Lloyd’s on the establishment of the Lloyd’s insurance linked securities (ILS) platform, which the law firm notes is “the first UK ILS structure which has been approved by the PRA for use for multiple, market wide transactions for Lloyd’s members.”

Clifford Chance said that London Bridge Risk PCC “will establish a market standard and efficient mechanism for existing and new investors to participate at Lloyd’s for years to come.”

In addition, the approval of the structure, “demonstrates PRA and FCA support for more innovative use of the UK ILS Regulations,” the law firm also explained.

Clifford Chance has been heavily involved in the working with the UK’s HM Treasury on the establishment of the UK ILS regulatory regime and the law firm has also worked on UK ILS structures for reinsurance firm SCOR, terrorism risk underwriter Pool Re, re/insurer Brit and also Neon.

Clifford Chance worked with Lloyd’s and the regulators in designing the structure and a set of market standard template documentation for use with it.

The vehicle is expected to have the flexibility to accommodate a range of individual investment models and objectives, Clifford Chance said, with these “designed specifically to meet Lloyd’s capital requirements and market practices, whilst also ensuring compliance by the PCC with the UK ILS regulations.”

Importantly, the law firm notes that London Bridge Risk PCC will, “facilitate capital efficient investment into Lloyd’s and reduce the frictional costs and time otherwise required to establish and operate a standalone ILS investment vehicle.”

Which should prove attractive to ILS investors and ILS fund managers that are attracted to sourcing returns by backing insurance and reinsurance underwriting in the Lloyd’s marketplace.

Katherine Coates, corporate and insurance partner at Clifford Chance, commented, “It has been a privilege to work with Lloyd’s and the PRA and FCA to design and implement this innovative structure which is one of the important building blocks of the Future at Lloyd’s project and will streamline the process for investors to participate in this important global insurance market.”

How much capital will flow through London Bridge Risk PCC and into Lloyd’s underwriting remains to be seen, but for those investors used to backing members of the market, or those looking to do so, as well as for syndicates looking to source more diversified sources of capital support, the vehicle promises to make that access simpler, more efficient and less time-consuming to set up.

Also read:

Lloyd’s ILS vehicle London Bridge Risk PCC approved for use.

Lloyd’s vehicle “reaffirms ILS potential of the London Market” – Perez, Horseshoe.

Lloyd’s must “learn how to walk” before expanding ILS activities: CFO Keese.

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