Lloyd’s can now set up a second protected cell company (PCC), building on the success of London Bridge Risk PCC (LBR), after securing the nod from the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
Depending on the nature of reinsurance written, the second London Bridge PCC (LB2) will provide independent services to investors, members, and/or syndicates of Lloyd’s – offering a wider range of market capabilities and enhancing accessibility for investors, which was highlighted as a key Future at Lloyd’s strategy deliverable.
“I am delighted that we are able to build on the success of our initial risk transformation vehicle to offer the market a new vehicle with broader capabilities, thus enabling market participants to have more options to attract capital markets investors to support their underwriting at Lloyd’s,” said Lloyd’s chief financial officer Burkhard Keese.
“Both PCC vehicles will complement the more traditional approaches to deploying capital and managing risks at Lloyd’s, with LB2 offering an efficient route for institutional investors to support the growth and diversity of risks written in the market.”
LB2 features coverage extensions and improved transaction execution. For instance, the new vehicle will be able to write excess of loss coverages for a corporate member; provide collaterised reinsurance, whether on an excess of loss or quota share basis, for a Lloyd’s syndicate; and fund the reinsurance obligation by offering either preference share or debt securities.
Lloyd’s noted: “Working closely with the PRA and FCA, Lloyd’s has developed a set of mandatory terms for the principal transaction documentation, that will provide greater commercial flexibility while maintaining regulatory compliance. This is embodied in a scope of permissions that enables new cells to be set up and reinsurance written without the need for any additional regulatory approval, providing these permissions are complied with.”
Just like LBR, LB2 will be independently managed under the ownership of an orphan charitable trust. Lloyd’s acted as the sponsor for the application to form the PCC.
