Online lottery provider Lottoland has launched a new business to business offering, enabling other brands to integrate its range of lotteries within their own client experiences, but with jackpot payouts continuing to be covered by Lottoland’s risk transfer, including its insurance-linked securities (ILS) coverage.
Lottoland Solutions offers B2B gaming solutions to clients and has announced its first roll-out of a turnkey lottery service for client Kindred Group today.
As this new service expands, which enables other brands to offer Lottoland games to their customers, the number of players of Lottoland games increases and as a result so will the chance of jackpot payouts being made, which could ultimately increase the risk for its ILS coverage.
Lottoland uses ILS as an integral part of its insurance risk management. It’s a good example of a corporate insurance buyer turning the insurance-linked securities (ILS) market for an efficient risk transfer product, backed by capital markets investors.
In announcing the roll-out of its first Solutions client, Lottoland Solutions director Michael Bogie said; “With jackpots guaranteed by Lottoland’s proprietary risk management, including our Insurance Linked Security, Kindred is the first tier one operator to be able to benefit from Lottoland’s unique and proven lottery betting solutions which have paid out €150m to lottery betting winners.”
The B2B Solutions offering will effectively bring new players to Lottoland’s lottery games, which could in time result in a greater need for jackpot insurance protection perhaps leading to more and larger ILS issuances, as Lottoland looks to ensure it can meet any payouts required.
The ILS market has shown a liking for jackpot lottery risk, as an exposure that they can model and calculate probabilities of loss for given the vast amounts of data available.
Lottoland has been one of the pioneers in this space, identifying the ILS market as a provider of insurance capacity to protect it against the large drawdowns that could occur from jackpots.
The company sees itself as a “professional risk manager” having gone to painstaking lengths to identify the best way to transfer the risks of lottery jackpot payouts, developing an insurance model at the heart of which are its fully-collateralised insurance-linked securities (ILS).
Lottoland advertises the fact that it is backed by “top institutional Insurance Linked Securities investors”, which it says include renowned financial institutions. As a result the provision of these lottery jackpot ILS to the company have been a good advertisement for the way ILS market protection can be used as a corporate insurance risk transfer product.
The company explained previously that; “Other operators can also benefit from Lottoland’s proven lottery insurance solution thanks to Lottoland’s B2B arm Lottoland Solutions. Lottoland Solutions guarantees all winnings pay outs with their fully collateralized jackpot insurance.”
CEO Nigel Birrell said that the ILS jackpot coverage; “Provides us with the freedom to grow our exciting and innovative product offering – something that can now also be extended to other operators thanks to our B2B business Lottoland Solutions.”
Lottoland renewed its collateralized jackpot winnings insurance protection in 2016, after a renewal clause was triggered due to the lottery providers rapid growth.
It will be interesting to see whether Lottoland’s expansion through this B2B Solutions offering could trigger another renewal, or simply a larger transaction when the current one, dubbed Fortuna 2, expires at the end of its two-year term.
Lottoland’s first ILS transaction from 2015 demonstrated its worth twice, with investors called on to pay some of the firm’s jackpot payments. The transaction paid out on a EUR14m winning in February 2016, and it also transpires a further EUR22m in May 2016.
Lottoland had previously said that it felt more secure in offering a B2B solution with the backing of the ILS based insurance protection.
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