2 July 2018Analysis

Guernsey stats for new PCC cells "well ahead" of 2017 figures

Guernsey's insurance-linked securities (ILS) market has seen significant activity in 2018, with the number of new cells of protected cell companies "well ahead" of those for 2017 to date, according to Guernsey Finance.

Cell of PCCs are the main method of writing new ILS business in Guernsey. So far in 2018, there has been 160 new cells, however it is important to note not all individual cells represent an ILS transaction on their own.

Overall the industry experienced overall net growth - including ILS - of 2.2 percent last year, with top line growth of 10 percent.

There were 853 international insurers in Guernsey at the end of 2017, with more than half (57 percent) represented by PCC cells, which Derek Maddison, chairman of the Guernsey International Insurance Association, said reflected the island’s strong position in ILS.

One of the drivers for the industry Maddison suggested was the increasing number of natural catastrophes for which people are seeking cover.

“Some of these risks can be difficult to place in conventional insurance markets,” he said. “There may not be enough capacity or the insureds may want a particular trigger to be used instead of proving an event in the conventional insurance sense. There is also a growing appetite among the institutional investors to diversify into such risks.”

Guernsey was the first jurisdiction to establish legislation permitting the formation of PCCs over 20 years ago.

The insurance industry in Guernsey has recently been considering establishing entities combining insurance and investment activity in one vehicle.

“Although this is at an early stage, this could present significant efficiencies for ILS fund managers,” said Guernsey lawyer Christopher Anderson, partner at Carey Olsen.

Guernsey Finance chief executive Dominic Wheatley commented: “These are exciting times for ILS. With international fragility and uncertainty on the rise, and innovation in the market, the ILS sector is rapidly developing.”