Buried deep inside today’s detailed Budget Report, there is a commitment to: “work with the industry and regulators to develop a new competitive corporate and tax structure for allowing Insurance Linked Securities to be domiciled in the UK. This alternative form of reinsurance makes greater use of capital markets and is a key growth opportunity for the sector” (see paragraph 2.228).

This is likely to come as a surprise to many, notwithstanding the UK government’s Autumn Statement 2014 announcement that it would explore options to attract more reinsurance business to this UK. One reason for the surprise is likely to be the concern previously expressed by the Prudential Regulation Authority and the European Insurance and Occupational Pensions Authority about the potential regulatory and financial-stability risks that ILS might generate for reinsurers and ILS investors, at some stage in the future.

Even so, this development will be welcomed in the City, especially if it enables the UK to rebuild its share of the world’s reinsurance market. It’s not yet clear what the timetable for these developments will be – save that further announcements are likely to be imminent. But it’s at least possible that “the new competitive corporate … structures” will include the development and implementation of a UK protected cell company regime. If it does, that will almost certainly make it easier for the UK to compete globally for the world’s ILS business.