Guernsey regulator clarifies collateral rules for ILS cells
17 December 2018
Guernsey has agreed to allow insurance-linked securities cells to benefit from rollover provisions, in a move which has been welcomed by the island’s thriving ILS sector.
The regulator, the Guernsey Financial Services Commission (GFSC), has clarified a number of issues around the authorisation process for ILS cells following talks with the Guernsey International Insurance Association.
They include formally confirming the availability of a “grace period” for the application of collateral at both the formation of new Special Purpose Insurer (SPI) cells, and renewal of deals in SPI cells, often referred to as rollover.
Katherine Jane, Director of Risk and Financial Stability at the GFSC, said in a letter to GIIA that the Commission accepted that the timing difference between a special purpose insurer committing to a collateralised reinsurance transaction, and the point at which the trust account is fully funded, was a commercial decision for the ILS industry with the full knowledge and acceptance of the cedant.
It has agreed to a 30-day period at the start of a transaction where a cell would not be considered to breach the fully-funded requirements of its ILS rules.
Guernsey’s ILS sector has performed well in recent years, with new registrations made in 2018 far outstripping a good year in 2017.
“We raised a number of regulatory matters with the Commission which we believed would make ILS in Guernsey even more attractive to our global client base and we very much welcome this move,” said Peter Child, Managing Director of Artex Risk Solutions in Guernsey and chairman of GIIA’s Market Development Committee.
“We already believe that Guernsey holds a number of advantages as an ILS domicile, including the breadth of our funds and insurance knowledge, our status outside Solvency II, our experience and, as proved here, the responsiveness of our regulator.”
Key issues for selecting an ILS domicile include company law, speed of establishment, taxation arrangements and regulation, and Mr Child said that Guernsey was well-placed in each area.
Dominic Wheatley, Chief Executive of Guernsey Finance, the promotional agency for Guernsey’s financial services industry, said that the move from the island’s well-respected and proactive regulator would be well received in the international insurance industry.
“A responsive regulator is an important contributor to the success of our supportive business environment.”
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