32 | intelligent insurer | November 2013
Are you seeing growth in the ILS sector in Guernsey?
Poulding: There has been significant growth in the ILS sector recently
driven mainly by the use of cell companies to structure transactions.
Helyar: ILS is the fastest-growing part of the insurance sector in Guernsey
with most of the new licences over the past 24 months being in the ILS sector.
Wallen: Yes, ILS business in Guernsey has been very much on the
increase since I first started seeing transactions of this nature back in 2007.
In terms of the number of new vehicles licensed by the Guernsey Financial
Services Commission, ILS represented approximately 80 percent of the new
business Robus established in Guernsey in 2013.
Rowson: Aon Guernsey has seen significant growth in Guernsey for the
provision of collateralised reinsurance. From small beginnings in 2006, when
Aon managed only one collateralised reinsurance deal, the sector’s growth
has been rampant. By 2012 we were managing 23 deals, and in 2013 we
managed 52. 2014 looks set to be our busiest year yet. Most of the 52 deals
from 2013 and earlier will renew, and in 2014 there have already been 25
new deals on our books, and it is highly probable that this figure will continue
to increase, making 80 deals a conservative expectation for 2014.
Why do you think this is?
Poulding: This is mainly due to the existence of protected cell
companies (PCC) and incorporated cell companies (ICC) legislation, the
expertise of local insurance managers and legal advisers and quick response
times by the regulator.
Helyar: Guernsey provides a more bespoke, specialist structuring option
than other ILS markets such as Bermuda where large platforms churn out
similarly structured cat bonds year on year. For example, we have done two
deals in the past two years, for Solidum and FWU, which are world firsts in
the ILS sector. Reputational concerns about Caribbean jurisdictions have
also encouraged specialists to come to Guernsey.
Overall there is more awareness of ILS as an investment opportunity and
more capital becoming available, not all of which is purely a herd instinct. The
investment selling point for ILS is not just about swift high risk returns but also
about intelligent non-correlation with financial markets. Unlike some recent
comments about ILS being compared to reinsurance as the difference between
the longevity of a wife and a mistress, I don’t think this applies to Guernsey,
we have observed long and steady growth rather than a headlong rush. Our
clients are focused, well informed and conservative, not poker players.
Wallen: The growth is partly a function of the large amount of capital
that has been flowing into the ILS sector which needs to be put to work,
and collateralised reinsurance is one way in which the ILS funds can access
strong returns from insurance investments. Having spotted that trend back
in late 2011 when ILS was a sector that Robus spent a lot of marketing time
and resources on, we are now seeing the fruits of that labour.
The Guernsey regulator has also been very supportive of ILS business and
this assistance has been invaluable in establishing cell creation procedures
that ensure deal completion times are competitive with those of the other
Rowson: Guernsey has a beneficial proximity to London, only a
45-minute flight, and ease of access to Zurich: another key centre of ILS
the IL s
Guernsey’s unique offerings have
been attracting investors for many
years, but as the ILS sector grows,
four of the Island’s experts tell
Intelligent Insurer why Guernsey is
a buzzing centre of excellence for
investors in this market.
November 2013 | intelligent insurer | 33
Mike Poulding is a director of
The Poulding Consultancy. He
is also a non-executive director of
a closed ended fund which invests
in insurance linked securities.
Mark Helyar is a partner at
Guernsey-based law firm
Justin Wallen is the managing
director at Robus Group’s Hexagon
PCC Group of Companies that
concludes fully collateralised
reinsurance contracts in protected
cells owned by ILS funds.
John Rowson is executive director
at Aon Risk Solutions. He is one
of a three-person underwriting
team that reviews documentation
and also director of five
transformation companies (one
PCC and four ICCs).
funds. Guernsey has an abundance of insurance accounting professionals,
who are suitably experienced to manage these transformers. The Guernsey
Financial Services Commission (GFSC) has also grown in experience
regulating these structures so that deals are appropriately regulated without
inhibiting the deal flow.
Why is Guernsey attractive to investors?
Helyar: Guernsey currently has the highest approval rating in the
world from the International Monetary Fund (IMF) for its compliance
with international regulation in all sectors of financial services and in
the combat of terrorist financing and money laundering. It has played
a central and leading role in developing the International Association
of Insurance Supervisors (IAIS) as a body governing global insurance
It has just signed its 50th tax information exchange agreement, and even
the UK’s prime minister has stated in parliament that Guernsey should
not be described as a tax haven, because it is simply not true. Guernsey
has the highest regulatory standards, well beyond those of many onshore
jurisdictions. It has no national debt, a high credit rating, a stable government
and fiscal independence from the UK.
It is also in the GMT time zone and has a mature and sophisticated blend
of professional competences, with a history of punching well above its weight
in financial services. It is generally a jurisdiction with a ‘can do’ attitude.
Wallen: There are a number of attractions including, but not limited
to, having individuals like myself who specialise in this type of business,
keeping the frictional costs of entering into such transactions as low as
possible and having PCC and ICC legislation because using cell structures
is a very efficient way of transacting ILS business. There are a number of
major banks with branches/subsidiaries in Guernsey who are able to offer
very competitively priced banking services such as letters of credit when
deals are collateralised in this manner.
Rowson: Unlike a growing number of offshore jurisdictions, Guernsey
has no debt, making it a very secure environment to invest in. Further, there
is a wealth of recognised banks to support deal flow and we have a wellestablished
judicial structure giving confidence to investors.
Are you expecting further growth in the sector?
Poulding: I expect that there will be significant further growth in this
sector both generally and particularly in Guernsey.
Helyar: We fully expect that the next step will see further integration
between the already sophisticated investment fund sector and the growing
ILS sector, with more ILS funds being created in Guernsey to take advantage
of the ability to structure deals here, and to take advantage of the choice
of Alternative Investment Fund Managers Directive (AIFMD) or non-
European compliant investment funds.
We are already seeing this with developments such as the recent acquisition
of part of Secquaero Advisers by Schroders, for example.
Wallen: Our Hexagon PCC Group has certainly experienced excellent
growth in 2013 and this has continued during 2014.
Rowson: Looking at the number of funds that are currently setting
up transformation platforms and the additional capital being invested
in the funds we already work with, we are expecting significant growth in
collateralised reinsurance locally. The future looks very bright.
Meet the panel
All four are members of the Guernsey International Insurance Association GIIA ILS sub-committee which focuses on developing regulation,
raising awareness and educating local service providers to support ILS funds.