Guernsey: Insurance Linked Securities – A Perfect Fit For Guernsey

Last Updated: 29 April 2014
Article by Fiona Le Poidevin

Most Read Contributor in Guernsey, September 2018

Fiona Le Poidevin of Guernsey Finance explains what makes Guernsey an attractive location for ILS.

The insurance-linked securities (ILS) sector is gaining traction across the globe as it evolves from what was previously regarded as a niche market to one that is a recognised, independent asset class.

For Guernsey's financial services industry this has come as no surprise. Our service providers and practitioners have long been aware of the benefits ILS products can offer insurers and investors, particularly as risks continue to diversify and grow around us.

Insurers like ILS because it enables them to purchase additional protection for low frequency, high severity losses, including natural and non-natural perils, operating in the traditional insurance market, typically in the form of catastrophe or "cat" bonds, collateralised reinsurance or industry loss warrants. For investors, ILS products are attractive because returns are non-correlated with the general financial markets. Although specialist catastrophe funds remain the largest investor in ILS, mutual funds including pension funds and institutional investors have increased their participation in this asset class significantly.

Blend of expertise

This 'twin-attractiveness' of ILS suits Guernsey perfectly as we have a long track record and existing expertise in both the insurance and investment fund sectors, which we can combine and use to optimise our ILS offering.

Importantly, Guernsey has a long history of being self-governing and self-funding. It is politically and economically stable with no national debt which should be taken into consideration compared with other jurisdictions that operate in the ILS space. Another attraction of Guernsey is the prevalent ethos of corporate governance and investor protection.

Guernsey pioneered the cell company concept back in 1997 with the introduction of the protected cell company (PCC) for use in the captive insurance sector. The subsequent success of this innovation is illustrated by the fact that we're ranked as the number one captive insurance domicile in Europe and the fourth largest globally.

The cell company is now used across the financial services world for the structuring of many different types of products, including ILS. For example, the Hexagon Group PCC has established more than 20 protected cells in Guernsey, each writing one or more fully collateralised reinsurance contracts with assets at risk exceeding US$300m. Our funds sector is highly respected internationally due to our experience which has accumulated over many years in dealing with a broad range of asset classes such as private equity, venture capital, funds of hedge funds, infrastructure, property and now ILS as a standalone asset class. Guernsey provides access to capital markets, most notably the London Stock Exchange (LSE) and other international exchanges including Hong Kong, Toronto, Ireland and Euronext, as well as the domestic Channel Islands Securities Exchange (CISE).

For example, the Guernsey domiciled DCG Iris Fund listed on the Main Market of the LSE in June 2012 after Dexion Capital raised more than £60m for the vehicle – a closed-ended feeder fund into the Low Volatility Plus Fund managed by Credit Suisse Asset Management's ILS team. DCG Iris announced in January of this year that it had achieved a total return of 2.2% in the six months to 30 November 2013, helped by low catastrophe losses. The company said it had also boosted returns by shifting away from catastrophe bonds into higher yielding private collateralised reinsurance deals.

There are fund managers and promoters in Guernsey with capital to deploy, some of which are showing an increased interest in ILS and setting aside allocations for the asset class.

LSE leader

Guernsey has more entities listed on the LSE markets than any other jurisdiction globally (excluding the UK). LSE data to the end of December 2013 shows that there were 115 Guernsey-incorporated entities listed across the Main Market, the alternative investment market (AIM) and the specialist fund market (SFM). Guernsey added 17 new entities during 2013, which again was more than any other jurisdiction except the UK itself.

Sufficient liquidity is a major challenge for many insurance related funds, but Guernsey's experience in successfully listing vehicles on the LSE and other markets is a key ingredient of our offering, as is our experience of dual listings. Dual listings bring with them the potential liquidity offered by a secondary market, such as our local CISE, which is a major benefit for an ILS investment strategy.

Insurance growth

Guernsey also boasts some impressive insurance statistics with figures to the end of 2013 highlighting our appeal. The island saw 89 new international insurers being licensed during 2013, a large proportion of which were vehicles relating specifically to ILS and their use of the PCC. Guernsey insurance managers Robus and Aon Captive and Insurance Managers (Guernsey) were responsible for approximately 40 of these new additions between them.

In 2013 Robus' protected cell company, Hexagon PCC Group, established 22 ILS structures under the Hexagon PCC Group umbrella. These structures are being used to conclude fully collateralised reinsurance contracts (sometimes known as private trades) in the non-life space. These see each cell enter into an excess of loss/aggregate/quota share reinsurance policy for various covers such as property (natural and non-natural perils), marine, energy, crop, premium reinstatement or prize indemnity. The cell is then fully funded by the investing ILS fund up to the amount of its maximum obligation under the reinsurance contract.

Aon Captive and Insurance Managers (Guernsey) has been involved with more than 80 ILS transactions since 2006, with annual transactions increasing year on year. One of those is Solidum Re Eiger IC Limited, an insurance vehicle which listed bonds with a value of US$52.5m on the CISE. The transaction was a reinsurance placement accepted by an incorporated cell (IC) from a US cedent. The transaction utilised a dual listing on the CISE and the Vienna Stock Exchange. Industry feedback also suggests that a number of collateralised ILS transactions were completed in 2013, which saw International Swaps and Derivatives Association (ISDA) contracts being used as an alternative to a reinsurance contract, demonstrating the breadth of the collateralised reinsurance and ILS business currently being undertaken in Guernsey.

The cost efficiency of our structures and the speed we can deliver them to market means that we compare very favourably with other domiciles. Similarly, Guernsey is regarded as a supportive jurisdiction for innovative alternative investment structures and we have a great history in this respect.


Guernsey's response to the Alternative Investment Fund Managers Directive (AIFMD) is further reassurance for any ILS strategy. The ability to either stay out of or 'opt in' to the rules could be of critical importance, particularly for the many ILS funds that are targeted at only non-EU investors. With Guernsey not being in the EU (although it is in the European time zone), it is not required to implement the AIFMD and is considered a 'third country' for the purposes of the AIFMD. However, with Europe still one of our biggest markets, we have ensured that this proportion of our business remains unaffected. As such, the Guernsey Government has introduced a dual regulatory regime for investment funds: the existing regime remains in place for managers and investors not requiring an AIFMD fund, including those using EU national private placement regimes and those marketing to non-EU investors; and an opt-in regime which is fully compliant with the AIFMD.

Although third countries are not required to implement an AIFMD equivalent regime until the third country passport becomes available in 2015, we felt that it was important to provide certainty as soon as possible. With that in mind, the GFSC rules that form the 'opt in' regime took effect from 2 January 2014.


Our funds regime is just one of a number of outstanding factors that mean Guernsey provides a unique proposition as a hub for ILS business. This is now being recognised by many in the market and we expect that this growth will continue as increasing numbers of insurers and fund managers seek to satisfy the demand from clients and investors for the diversified and uncorrelated returns provided by ILS.

An original version of this article was published in Captive Review's Capitve ILS Report 2014, March 2014.

For more information about Guernsey's finance industry please visit

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Carey Olsen
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Carey Olsen
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions