Nick Wild, ofJLT Insurance Managementin Guernsey,
discusses how the company created innovative solutions for the
housing and mortgage markets in the wake of the financial
I believe innovation is often driven by necessity, as it is hard
to innovate and easy to replicate. However, replication does not
work when there has been a shift in the underlying economic
The current financial crisis has its roots in substantial
failures in the US housing and mortgage markets. It is not my
intention to discuss the causes but it is important to understand
the consequences and how this led to the need to innovate. The
global financial crisis left the UK mortgage market without the
support of a viable Mortgage Insurance (MI) product and that left
the borrower with few mortgage lenders that could afford to lend at
95% Loan to Value (LTV). Under Basel rules, the capital charges on
loans of 95% LTV are very high.
All of this at a time when the UK needs 250,000 new homes per
annum to meet the needs of the population, with borrowers unable to
raise deposits of as much as 25% to access affordable
JLT identified the vacuum in the market and assembled our team
with expertise in MI. The firm partnered with the key stakeholders
to ensure we created a solution that worked for all. For three
years, this team developed many derogations of the final scheme as
we struggled to attain the innovation required to ensure a
Along the way, the team innovated in the following areas:
Identifying a party to pay the premium and provide the risk
capital. We worked closely with the Home Builders Federation and
their members, who are the party that pays for this solution for
new build homes.
Creating an insurance vehicle to deliver the cover. We
determined that a protected cell company (PCC) located in Guernsey
would provide flexibility and security for all the scheme
participants. This is the first time a PCC has written MI.
Designing the insurance policy to provide cover for seven years
with a depth and certainty of coverage that would obtain capital
relief for the lenders was extremely challenging.
Bringing Government to the table for the first time as a
provider of MI capacity. The Government provides a financial
guarantee to the PCC, which enables it to deliver the depth of
cover required for capital relief.
Getting lenders to accept the policy would work for them and
that it could deliver the security they require as well as capital
relief. The lenders are the insured and under the policy they
control the funds in the PCC.
Catering for the largest to the smallest builders in the
country was a scheme requirement and was solved by the development
of Multi User Cells (MUC) in which liabilities are borne by
individual participants as well as a level of mutualised risk
taking. These are the first MUCs to be created in a PCC.
Cash flow is vital to builders and Cell Capital and Premium is
paid from the proceeds of each house sale. This runs counter to the
norm, which is to fund Solvency Capital in advance of accepting
These seven innovations required close liaison with many parties
including the Financial Services Authority and the Guernsey
Financial Services Commission and we are most grateful for their
input to the NewBuy mortgage scheme that was launched in March
The NewBuy scheme now has 85 participating builders. HBF
Insurance PCC Limited is sponsored by the Home Builders Federation
and is operating with 50 cells providing cover to six lenders. It
has potential underwriting capacity of £1.6bn, which is
sufficient to insure mortgages of £18bn. We believe that
NewBuy has the potential to make a very substantial contribution to
regenerating the mortgage market and the construction of new homes
in England. A similar scheme has been launched by the Scottish
Since the PRIIPs Regulation was published on 9 December 2014, the concept of a multi-option product has been one of the most discussed topics among the manufacturers of insurance-based investment products.
Directors & Officers Insurance (D&O) is a relatively new
branch of insurance in the United Arab Emirates (UAE) market.
Accordingly, issues such as allocation of costs have not yet been
considered by UAE or Dubai International Financial Centre (DIFC)
The MFSA issued a consultation document proposing the introduction of external auditing requirements for certain quantitative reporting templates that will form part of the Solvency Financial Condition Report.
From August 12 2016 when the UK's Insurance Act 2015 takes effect there will be differences affecting business (ie non-consumer) policies issued in Isle of Man and those issued in UK, including renewals.
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