The Isle of Man has enacted dedicated legislation to provide a bespoke authorisation and supervision regime for insurance special purpose vehicles (ISPV) to facilitate insurance linked securities (ILS) transactions.

The Isle of Man already boasts a diverse and well-established insurance sector, with around £55 billion of insurance assets already managed through the Island. This new framework further enhances the attractiveness of the Isle of Man to the insurance sector and provides for the creation of a specialist class of (re)insurer for cat bonds, mortality bonds and other collateralised (re)insurance transactions.

The new ISPV regime will provide an expeditious and transparent authorisation process, simple and proportionate on-going regulatory requirements and cost-effective operating environment, all from a convenient European time-zone.

Key Requirements of the new ISPV framework

The Isle of Man's new ISPV framework is specifically targeted at sophisticated market participants. Other key requirements include:

  • Authorisation of the ISPV is restricted to one or more specific (re)insurance contracts
  • Full funding and limited recourse arrangements
  • Appointment of an Isle of Man registered insurance manager to administer the ISPV

Although there are a number of other domiciles with ambitions in this space, the ILS market is growing. The Isle of Man offers industry participants more choice and some key advantages, including:

  • A well-respected and established insurance sector
  • AA rated politically stable jurisdiction
  • Robust English-law based legal system
  • Proximity to European markets
  • Transparent and tailored regulatory regime

The Isle of Man expects, in particular, to leverage its jurisdictional expertise in relation to life insurance and the space sector in order to collaborate with industry to utilise the ISPV regime to deliver innovative risk transfer solutions for these markets.

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.