The Guernsey Financial Services Commission (GFSC) has released a new set of rules to clarify the regulatory treatment of collaterised reinsurance, including insurance-linked securities (ILS).
The Insurance Business (Special Purpose Insurer) Rules 2016, published on 1 January this year, mean an applicant for licensing of a new special purpose insurer (SPI) may be granted single consent for the formation of further SPIs without going through another application process.
The Insurance Business (Solvency) Rules 2015 were also updated to include a new class of insurer. As part of the amended rules, SPIs are no longer required to maintain minimum or prescribed capital requirements.
Dominic Wheatley, CEO of Guernsey Finance, said: “These positive changes are a codification of the way the GFSC already applies its discretionary powers and they provide a new level of operational certainty and efficiency for the insurance sector.”
“This sort of development highlights Guernsey’s ability to find sensible, proportional regulatory responses to the necessary but growing compliance burden on financial services organisations which we are confident will appeal to others considering ILS structures in particular.”
According to the GFSC, 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.
Mark Helyar, of counsel at Bedell Cristin, commented on the change, saying: “Collaboration between industry and the regulator meant that we could deliver this new legislation rapidly.”
He said: “These rules will provide a significantly enhanced transparency to the manner in which Guernsey's regulator approaches the supervision of collateralised reinsurance structures and demonstrates Guernsey's equivalence of approach to Bermuda as an alternative jurisdiction for ILS within the European time zone.”
