With implemented and planned reforms to its insurance-linked securities regulatory regime, the United Kingdom is “becoming a more competitive jurisdiction for insurance-linked investment” according to Shoib Khan, Director, Insurance Supervision at the Prudential Regulation Authority (PRA) of the Bank of England.Speaking at a recent event in London, Khan explained that the updates planned and already made to the UK’s ILS regime are designed to help the country better “fulfil its important role as a global hub for insurance and risk management.” , the Government of the United Kingdom confirmed new authorisation targets for insurance special purpose vehicle (ISPV) applications, as well as a 10-day target for certain insurance-linked securities (ILS) arrangements, while also launching a new consultation on further changes to make it a more flexible and extended risk transformation regime.Khan discussed this in his recent speech, explaining, “On ISPVs, we’re continuing our work to ensure the UK regime is competitive.In its current form, the regime has delivered some notable successes: for example, London Bridge 2 has brought over $2bn of capital into the London Market.

Again, we’re not taking credit for others’ hard work, but we are making sure that we look to improve and enhance our ability to support such innovation.“We know there’s more to do and, in July, we implemented a series of significant enhancements to the UK ISPV regime, taking steps to streamline and simplify the approvals process (approving cat bond vehicles within 10 working days of a complete application), reducing the number of SMFs, and allowing ISPVs to issue multiple contracts.“Necessary legislative changes, currently under consultation by HMT, signal a broader ambition to ensure the UK remains a leading centre for risk transfer innovation.” Khan further referenced ambitions to extend the ILS regulatory regime to be useful to life insurance companies as well.

“As well as the traditional use of ISPVs in the property and casualty market, we’re also looking at wider possibilities for their use.As my colleague , and we expect to publish a discussion paper on this later this month,” Khan announced.The moves are all about positioning the United Kingdom to capture a larger share of ILS activity, while making the regulatory regime useful to more of the country’s insurance and reinsurance industry as well.

In addition, it’s about ensuring the UK is an attractive jurisdiction for ILS investment as well.Khan said, “With the introduction of captives, and the continued work to reform the ISPV regime, our ambition is clear: to play our part in helping the UK fulfil its important role as a global hub for insurance and risk management.By facilitating innovation, through making it easier for capital to come into the insurance market, firm resilience is improved, risk is better spread, and more coverage and new products are provided to those who need it across the real economy.

Ultimately, this is good for both financial stability and policyholders.” “Once our work on ISPVs is complete, we’ll have added more optionality to the UK regulatory regime,” Khan said.Adding that examples such as Lloyd’s London Bridge 2 ILS structure, , is an example of UK innovation and the market there providing new products and solutions.“The UK is becoming a more competitive jurisdiction for insurance-linked investment, thanks to our reforms aimed at making these vehicles more accessible, transparent, and resilient,” Khan explained.

Of course, the UK faces competition for insurance-linked securities (ILS) business from the dominant market Bermuda, as well as newer entrants Singapore and Hong Kong, with Ireland, Cayman and Guernsey also vying for activity as well.The ILS regulatory framework has become far more compelling and this should serve the country well as it looks to grow activity over time.The UK has a large and established insurance and reinsurance marketplace, as well as Lloyd’s of course, which means it is well-positioned and should see a steady uptake if the insurance-linked securities regulatory infrastructure can be made comparably efficient to the offerings of other ILS domiciles around the world.

Khan summed up by saying, “Looking ahead, we want our commitment to innovation and competitiveness to be increasingly clear – not just in what we say, but in what we do.Of course, balance is key: and where innovation poses a risk to our objectives we will scrutinise that closely.“But, based on all the examples I’ve given today, we feel we’re doing our bit.

The next step is for you – the market – to light the blue touch paper of innovation.” – .– .– .

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