After much lobbying, new regulations came in at the end of last month setting out a framework for Insurance Linked Securities (ILS) in the UK – and we told you what the proposed
regime hopes to achieve. But who will benefit most from the new set up?
By unlocking a multi-billion-dollar market, the new ILS regulations stand to benefit both the London insurance and reinsurance market, and the wider UK economy, Martin Membery, partner at Sidley Austin’s insurance practice, told Insurance Business.
“From the London insurance and reinsurance market perspective… this is something that really helps to reinforce London’s place as a premier centre worldwide for insurance and reinsurance,” Membery said, explaining that it was for this reason that bodies such as the London Market Group had pushed for the move.
“Being able not just to focus on the traditional markets, but also increasingly on the boundaries between capital markets and insurance through ILS, and bringing more of that onshore, will have knock-on benefits for the wider insurance industry here,” he went on to say.
However, it is not just those within the insurance industry that stand to benefit.
“Conceptually, there is obviously a benefit to the UK economy, and this is why the government itself has been keen to sponsor these changes – because they would want to see more of the revenues that are developed by ILS ventures,” Membery noted.
Although the Insurance Special Purpose Vehicles (ISPVs) themselves – legal entities created specifically to facilitate the ILS transactions – won’t be subject to corporation tax, establishing an attractive tax regime for them may have the knock-on effect of bringing more infrastructure around running ILS ventures into the UK.
“That is ultimately going to be generating more UK revenue, some of which will be taxable, with more people here in the UK paying tax,” Membery concluded. “So there is potentially an uptick, from the government’s perspective, in terms of tax revenues.”
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