Insurance linked securities
Insurance-linked securities (ILS) are financial instruments which are sold to investors whose value is affected by an insured loss event. The term encompasses catastrophe ‘cat’ bonds and other forms of risk-linked securitisation.
ILS has become popular with both insurers and investors in recent years. They permit an insurer to purchase additional protection for low-frequency high-severity losses such as those connected to natural catastrophes. Meanwhile, investors are attracted to ILS because returns are non-correlated with the financial markets.
“Guernsey can boast a diverse range of transactions and risks across its ILS sector, including the reinsurance of satellites, lottery risk, football clubs and players and marine reinsurance. The Island's focus does not just revolve around traditional catastrophe risks.” Dominic Wheatley, Chief Executive of Guernsey Finance
Guernsey's experience and expertise in both the investment funds and insurance sectors are combined in its ILS offering. Fund managers and promoters with capital to deploy are brought together with transformation managers who understand insurance risk.
Innovator of cell companies
A major differentiator of Guernsey is the ability to offer two innovative cell structures; incorporated cell companies (ICCs) and protected cell companies (PCCs) with some ILS funds availing themselves of both structures.
These structures provide a low cost, low administration vehicle with which to access the reinsurance market.
Access to capital markets
Guernsey provides access to capital markets, notably the London Stock Exchange (LSE) and other international exchanges including Hong Kong, Toronto, Ireland and Euronext, as well as The International Stock Exchange (TISE).
There are now more than 2,000 securities listed on TISE. Its international recognitions which widen the investor base, sensible rules, speedy turnaround times and competitive fee regime have attracted significant ILS business, including some highly innovative listings. This includes the first private catastrophe bond to be listed on any exchange worldwide and the first ever securitisation of takaful (Sharia compliant) insurance policies. ILS funds are also listed on TISE.
Guernsey is the global leader for LSE listings of non-UK entities. At the end of 2016 there were 124 Guernsey entities listed on the LSE which puts the island well ahead of all of its competitors.