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UK unveils new rules for Insurance Linked Securities

IBR Staff Writer Published 24 July 2017

The UK government has introduced new rules for Insurance Linked Securities (ILS) in a move to sustain the global competitiveness of the country’s reinsurance market.

According to the HM Treasury, the new regulations provide ILS with a competitive regulatory and tax regime designed to ensure that the UK gets its part of the share in the fast growing reinsurance sector.

With the launch of the new regulations, the insurance and reinsurance sectors are expected to have a greater certainty about the working of the new regime. The regulations, which will be tabled before the Parliament after summer recess, would allow the two sectors to be ready in preparing for the new rules once they come into effect in autumn.

HM Treasury Economic Secretary Stephen Barclay said: “This new bespoke regime for Insurance Linked Securities will ensure the UK remains the most competitive insurance and reinsurance hub in the world.

“This global business is evolving rapidly and we are determined to make sure we’re part of this evolution.”

Through ILS, insurance and reinsurance companies can transfer risk to the capital markets. Thereby, the government says that the risk can be handled in a much effective manner by the insurers and reinsurers for businesses and consumers.

Till date, more than $80bn of ILS has been issued out of which more than $10bn has been issued in the current year itself.

The new regulations lay out how to set up special vehicles to issue ILS, its legal framework and the related tax treatment.

They also provide for a customized and proportionate approach to authorisation and supervision as per the government.


Image: The HM Treasury has laid out new rules for Insurance Linked Securities. Photo: courtesy of Crown copyright.