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Lloyd’s new ILS vehicle an “efficient mechanism” for investors: Clifford Chance


The new Lloyd’s sponsored protected cell company that was announced last week, London Bridge 2 PCC Ltd, represents “an efficient mechanism” for both existing and new investors to access risk from the Lloyd’s market, according to Clifford Chance.

clifford-chance-lloydsThe international law firm worked with Lloyd’s and the UK financial market regulators to develop the new insurance-linked securities (ILS) structure, which marks “a substantial expansion of Lloyd’s existing ILS platform,” Clifford Chance explained.

The launch of London Bridge 2 PCC Ltd is also a substantial expansion of Lloyd’s “ambitions to attract new capital to the market,” the law firm said.

Adding that it, “establishes an efficient mechanism for existing and new investors to participate at Lloyd’s for years to come.”

Lloyd’s new PCC structure has been designed to “accommodate a range of individual investment models and reinsurance structures,” the law firm continued.

As we reported last week, the second ILS vehicle sponsored by the Lloyd’s insurance and reinsurance market brings much greater flexibility to the way its market participants can access the capital markets and ILS investors can access risk from underwriters there.

Clifford Chance said that the new London Bridge 2 PCC ILS vehicle has been devised to meet Lloyd’s capital requirements and market practices, while keeping the PCC compliant with the UK ILS regulations.

“It will facilitate capital efficient investment into Lloyd’s, reduce the frictional costs and time otherwise required to establish and operate a standalone ILS investment vehicle and potentially open up Lloyd’s to significant third party capital,” the legal company said.

Importantly, the new ILS structure also demonstrates regulatory support from the PRA and FCA for more innovative use of the United Kingdom’s insurance-linked securities (ILS) regulatory framework.

Clifford Chance also advised Lloyd’s on its first ILS vehicle, London Bridge Risk PCC and has been a contributor to UK ILS regulatory development work and worked on other UK ILS structures sponsored by leading insurance and reinsurance firms.

“It is an exciting and significant change for the Lloyd’s market and a significant development for the wider UK ILS market,” Clifford Chance said.

You can hear a keynote speech from Burkhard Keese, CFO at Lloyd’s, at our upcoming ILS conference in London on September 6th. Register here to attend.

Also read: Lloyd’s new LB2 ILS structure brings flexibility the market wants.

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