Isle of Man Captive Association
With the doors to ILS opened by new legislation, Simon Nicholas of the Isle of Man Captive Association explains what this means for the industry
Can you give some context around what facilitated the introduction of the Insurance Special Purpose Vehicle (ISPV) legislation? Was there a great deal of government support?
KPMG, Aon, and Appleby were involved in the working party to consult on the ISPV legislation. This was triggered by each of us being approached by global clients, some of whom already had a presence on the island, regarding how to execute insurance-linked securities (ILS) structures in the Isle of Man.
At the time, a tailored legislative framework did not exist and so the working party collaborating with the regulator and government set upon designing the framework and writing the proportionate and tailored regulation.
It was felt that transparency, speed to market, and clarity (being written in plain English) were the key objectives.
The commercial reinsurers that approached us were looking for a reputable insurance jurisdiction with a tailored ILS regulatory framework this side of the Atlantic.
How does the Isle of Man’s offering differ from the nearest competition? Did any particular domicile inspire the Isle of Man to introduce the new legislation?
The benefit of writing the ILS legislation when we did was that we were able to assess what worked well in other domiciles.
Having worked on ILS structures whilst in Bermuda for over six years, I was very familiar with the framework and the evolution of their ILS and reinsurance industry since the early 2000s. Equally, with Aon, Appleby, and KPMG’s presences in Bermuda and other leading ILS jurisdictions, we were able to choose the ‘best in class’ features from each framework and apply them to the Isle of Man.
When we consulted with the industry and subsequently tested our regulations with a leading global ILS broker it was clear that the London market and other leading users of ILS did not want any bells and whistles but more a robust, proportionate framework which provided transparency to applicants and speed to market—hence the five day regulatory decision turnaround time (if the application is correctly submitted).
Has there been much action on the ILS front as a result or is it too early to tell? Is there any pressure to succeed, given the effect this kind of legislation has had on other domiciles?
ILS is a very exciting and fast evolving area of insurance and the Isle of Man legislation has been market tested by several global and well-respected players in the ILS market, including some of those who already have a presence on the island.
With a promising pipeline, we expect this to complement the Isle of Man’s already successful and diverse financial services industry. The Isle of Man has globally-recognised international life, non-life reinsurance, funds, e-gaming, and space industries all of which have shown interest and each of the key advisors on the island, with previous experience in ILS, are working on early stage projects.
We are confident that from discussions with local and international, including European, sponsors that we will soon develop the pipeline into successful well-executed transactions.
Are there any other regulatory initiatives on the horizon?
Insurance regulation is changing around the world and the Isle of Man is not alone with this. The Insurance and Pensions Authority, our insurance regulator, is currently consulting on enhanced regulations in conjunction with the International Association of Insurance Supervisors core principles whilst being mindful of Solvency II, given our London and Dublin market neighbours.
