Guernsey: New Rules As Guernsey Evolves Its ILS Regime

Last Updated: 27 February 2017
Article by Dominic Wheatley

Most Read Contributor in Guernsey, July 2017

New rules for Special Purpose Insurers (SPIs) in Guernsey demonstrate the jurisdiction's intention to remain at the forefront of growth in the insurance-linked securities (ILS) sector, writes Dominic Wheatley of Guernsey Finance.

The Insurance Business (Special Purpose Insurer) Rules 2016 came into effect on 1 January 2017 and see the Guernsey Financial Services Commission (GFSC) clarify the regulatory treatment of collateralized reinsurance, including ILS.

The rules allow an applicant for the licensing of a new SPI to be granted a single consent for the formation of further SPIs without call for further application. The streamlined application process now allows new insurers to be established within one business day.

The Insurance Business (Solvency) Rules 2015 have also been amended to expressly include the new class of insurer. Under the new rules an SPI is not required to maintain the minimum or prescribed capital requirements, nor to conduct its own risk or solvency assessments. This approach properly reflects the risks associated with SPI vehicles, where typically 100% of the possible loss associated with underwriting a reinsurance contract is held in a trust account independent of the SPI vehicle.

Mark Helyar, Of Counsel at Bedell Cristin, who drafted the rules in collaboration with the GFSC and the Guernsey International Insurance Association (GIIA), explains the new rules effectively codify the discretions already applied by Guernsey's regulator under existing 2002 legislation.

"Those 'in the know' were already familiar with the Guernsey's approach in this area, but the new SPI rules make it available to all. Previously, comparing Guernsey's approach to, for example, Bermuda, had been difficult because of the lack of transparent, independent guidance about how ILS works and is licensed and regulated. It had been an area which competitors were keen to highlight to potential clients because it enabled them to imply a lack of certainty, but that was never a true reflection of the regulatory approach in Guernsey," said Helyar.

SPIs must be fully collateralised to the extent of their liabilities and, in addition to ILS, may include collateralised reinsurance, catastrophe bonds, side-cars and life based securitisations.

Typically, cash assets will be applied against liabilities. However, under the changes, the GFSC recognises that the commercial interests of the counterparties may be satisfied using (re)insurance, letters of credit or partly paid shares. These changes demonstrate Guernsey's equivalence of approach to Bermuda as an alternative jurisdiction within the European time zone.

Those already familiar with Guernsey will not be surprised by the jurisdiction's nimble ability to innovate and evolve the ILS product. After all, 2017 marks the 20th anniversary since Guernsey conceived and introduced the Protected Cell Company (PCC) to the world for use in the captive insurance sector. The subsequent success of this innovation, as well as the later introduction of the Incorporated Cell Company (ICC), is illustrated by the fact that the cell company is now used across the financial services world as an alternative application for the structuring of many different types of products.

The fact that Guernsey pioneered the cell company concept means that the island has developed significant experience in this area and is now putting that expertise to use in its ILS offering where Guernsey's long track record in the investment funds and insurance space are combined.

As such, Guernsey acts as a centre where fund managers and promoters with capital to deploy are brought together with the transformation managers who understand insurance risk.

Indeed, the island's funds industry is so well-regarded that Guernsey remains the global leader for non-UK listed entities on the London Stock Exchange. Vehicles established in the island can also access other global capital markets, including the exchanges in Frankfurt, Ireland, Toronto, Australia, Hong Kong and Euronext, among many others, as well as the Channel Islands Securities Exchange (CISE), which is based in Guernsey.

In fact, in 2012, the CISE became home to the first private catastrophe bond listed on any exchange worldwide. Upon the listing of Solidum Re Eiger IC Limited on the CISE, Cedric Edmonds, Partner at Zurich-based Solidum Partners and Director of Solidum Re Eiger IC Limited, extolled the virtues of Guernsey as an ILS destination by highlighting its ICC legislation and the quality and 'can do' attitude of its service providers when faced with something new.

Conclusion

There are a number of outstanding factors which mean that Guernsey provides a unique proposition as a hub for ILS business.

This is already being recognised by many in the market and we expect that this growth will continue, particularly with the introduction of SPI rules, which clarify the regulatory treatment of collateralised reinsurance, including ILS. The innovative update highlights Guernsey's ability to find sensible, proportionate regulatory responses to the necessary but growing compliance burden on financial services organisations.

An original version of this article was first published by Clear Path Analysis as part of its Insurance Linked Securities - Asset Owner Insight report, January 2017. 

For more information about Guernsey's finance industry please visit www.guernseyfinance.com.

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 Mondaq.com.

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

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.