19 February 2014Analysis

Gibraltar to use PCC legislation to compete for ILS deals

Gibraltar plans to become an Insurance Linked Securities (ILS) jurisdiction within the European Union. According to Gibraltar Finance, the region will have its first ILS transaction completed during 2014.

Using its 2001 Protected Cell Companies (PCC) legislation as an “attractive part of its ILS offering”, it will enter the market place with its Special Purpose Vehicles (SPV) Regulations 2009.

"The Gibraltar insurance industry has grown significantly over the past ten years, in particular the motor sector. We are very proud of the progress that has been achieved and we are keen to develop other and complementary areas of insurance. We believe that insurance linked securities offer one such opportunity,” said Albert Isola, Minister for Financial Services.

A representative from Gibraltar Finance said: “The legislation that we will enter with is attractive to investors because the majority of the ILS transactions in Guernsey use a PCC structure and, for example, collateralised reinsurance transactions there typically use the PCC structure.”

Gross premium income for Gibraltar's insurance companies in 2012 exceeded £3.8 billion, with the region taking a 16 percent share of the UK motor market.

Gibraltar Finance's representative added: “We believe there is an opportunity, with the introduction of Solvency II, for a new ILS jurisdiction to be established within the European Union. Dublin has been the location for a number of ILS transactions in recent years and, although relatively few compared to Bermuda, this demonstrates that there is room for expansion and competition in this field."

Aon’s director and global ILS practice leader, Liz Frederick, who is based in the Cayman Islands recently provided ILS training for Gibraltar's Financial Services Commission and a number of Gibraltar's legal and accounting firms.

Isola announced the government’s planned attendance of the SIFMA Insurance and Risk Linked Securities conference in March.