Lloyd’s ILS structure to be about capital provision through Members

The impending insurance-linked securities (ILS) structure that is being developed by the Lloyd’s of London insurance and reinsurance marketplace will be about capital provision through Lloyd’s members, so investors will benefit from a new web-based platform for managing their asset allocations to the marketplace.

In a briefing today, Lloyd’s CFO Burkhard Keese presented the newly designed online portal that will allow Lloyd’s members to better manage their allocations to the market.

Based around the Investcloud platform, which provides real-time transparency to members Funds at Lloyd’s investments, the online portal will make it simpler to manager investments and to see their performance.

It will allow members to analyse their Funds at Lloyd’s allocations and view their values and other data points. It looks set to be a much simpler and more user friendly experience for the management of investments into the Lloyd’s insurance and reinsurance marketplace.

During the briefing Keese explained that the Lloyd’s multi-arrangement UK Insurance Special Purpose Vehicle (iSPV) is still at the approval stage with the PRA.

He said that this could be as soon as next week, but he couldn’t be certain.

It had been hoped the iSPV could be ready for use by year-end, but we understand it’s more likely to be in Q1 or 2 2021.

We asked Keese what the new online portal for managing members Funds at Lloyd’s means for potential ILS investors and he said that they too will be able to benefit from it.

He explained that the soon to be available iSPV structure will features cells and a core company and that each cell will be providing capital to members at Lloyd’s.

As a result, the Lloyd’s ILS platform looks set to be about providing capital to members through the iSPV, not backing reinsurance arrangements of risk channelled through the iSPV, as Keese said that this can already be done directly.

Of course, it is already possible to write collateralised reinsurance for syndicates at Lloyd’s on a direct basis, as part of their reinsurance programs.

But we and others had wondered whether Lloyd’s might be planning to cede market risk through the iSPV, to ILS investors, but it appears this won’t be the case.

As a result, it seems investors or ILS funds wanting to utilise the new Lloyd’s iSPV when it is launched will either need to have their own member, or provide their capital through a Lloyd’s member.

ILS fund managers have set up their own Funds at Lloyd’s in the past, to fund market participants, so it seems the iSPV may become a more direct way to achieve that kind of allocation to Lloyd’s, rather than a direct allocation to pure insurance risk.

Of course, that’s not to say Lloyd’s iSPV won’t be used in future for specific ILS transactions, as the market could issue notes from the vehicle to support specific layers of risk, or perhaps to buy retrocession for the Central Fund.

But to begin, it seems, perhaps unsurprisingly, that Lloyd’s new ILS platform will be to do with making the standard way of backing business at Lloyd’s more readily available and compatible with ILS investors and funds ways of allocating, rather than providing an efficient way to get risk into, or out of the market.

Also read: Lloyd’s expects ILS iSPV to be ready for use by year-end.