An insurer that launched the UK’s first insurance-linked securities (ILS) vehicle says it expects investor appetite to continue to grow after a positive start.
Neon Underwriting set up NCM Re, which launched on January 01 this year, just weeks after a new regulatory regime came into force which the government hopes will help position the UK in becoming a hub for ILS business.
Deepon Sen Gupta, corporate strategy director at Neon, told Insurance Business that the insurer had its work cut out in being first to market after the new rules were approved in November.
“We had a great team working very hard to make sure it got done. As you’ll appreciate, if you’re the first one through any new regime, there are an awful lot of unknowns - whether that’s from the regulator’s approach, or whether that’s from the process perspective,” he said.
Neon, a specialist Lloyd’s insurer, worked closely with the Prudential Regulation Authority (PRA) in launching the vehicle, but Sen Gupta said the firm encountered some hurdles along the way.
“There were a lot of learning curves across multiple parties. But ultimately, we were focused on making sure that we were the first ones through. We were very focused on getting a transaction done in time for [January 01].
“Trying to raise capital with investors for a new side-car, whilst getting them up to speed with what the new UK ILS regime looks like, was also no easy feat. But again, we had a good team and we managed to get it all done in time,” Sen Gupta said.
Following a positive reception, the insurer predicts that investor appetite will continue to increase over time.
“In the first instance we had a handful of investors, and as we look ahead to 2019 and beyond, we continue to talk to investors around our aspirations, plans and potential for future capital-raising, and everyone appears to be extremely positive,” Sen Gupta said.
“From our perspective, we’ve started with a side-car, and in due course we would like to grow our third-party capital initiatives and our third-party capital strategy.”
As a whole, the UK has significant potential to become a hub for ILS under the new framework, according to the director.
“Fundamentally, in London and in particular the Lloyd’s market, there is a wealth of underwriting experience, and taking a step back, what this is trying to do is to say – we have access to underwriting talent and underwriting excellence, and [we want to] match that with capital,” he said.
“The transformation mechanism is the ILS structure, but ultimately what you’re trying to do is make sure that you find the best business. In order to do that, you need the best underwriters, and that’s what London is renowned for.”
