The London Market Group (LMG) said today that it welcomes the beginning of the UK government HM Treasury’s legislative work to put in place the framework to support the regulation and facilitation of an insurance-linked securities (ILS) market.
As we wrote earlier today, the UK government published draft amendments to its Bank of England and Financial Services Bill, which would provide it with the power to both regulate and facilitate ILS business, including collateralised reinsurance.
The amendment provides some detail on a ‘transformer’ structure that would be made available under the regulation, enabling these vehicles to be established and operated in the UK and London reinsurance market, as well as for the investments issued by these vehicles to be traded.
Malcolm Newman, CEO of SCOR’s Paris-London Hub, Chairman of the International Underwriting Association and sponsor of LMG’s ILS Working Group, explained “This is very good news for our work in innovation and growth. London is a centre of excellence for global specialty re/insurance business, and we want to lead the world in terms of new products.
“ILS is very much at the innovative end of the market and we want London to be the next big centre for this business. We are delighted that the Government has worked so closely with the LMG to facilitate the creation of an onshore UK hub for the capital markets products and we look forward to further progress on implementing a new and competitive framework for ILS in 2016.”
The LMG notes that the tabled amendment targets a type of Special Purpose Vehicle (SPV) used in ILS and collateralised reinsurance transactions. The SPV is referred to as a transformer in the amendment tabled by the Government.
Once the amendment passes through the legislative process and is accepted by Parliament, it will give Treasury ministers the ability to regulate for any aspect of ILS activity, LMG said. The House of Lords will consider the amendment on Wednesday 11th November, the second day of the Committee Stage of the Bill.