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Insurance Linked Securities

The Isle of Man Insurance and Pensions Authority has recently brought into effect its regulatory framework for Insurance Special Purpose Vehicles (“ISPVs”), which has been developed in close consultation with industry and the Isle of Man’s Department for Enterprise.

From March 5th 2015 ISPVs represent a new specialist class of (re)insurer for the Island which is designed to facilitate Insurance Linked Securities and other collateralised (re)insurance transactions between sophisticated parties.

Insurance Special Purpose Vehicles (ISPVs)

Specifically, the regulations create a framework for the purpose of giving effect to transactions commonly referred to as Insurance Linked Securities such as Catastrophe Bonds, Mortality Bonds, Industry Loss Warranties, Sidecars and other collateralised insurance and reinsurance structures.

The framework facilitates such transactions by using ISPVs which are insurance or reinsurance companies specifically licensed by the Authority for that purpose.

What are the main differences between an ISPV and a conventional (re)insurer?

An ISPV must only have (re)insureds and investors which are suitably sophisticated for this specialist form of business. Prospective participants should refer to the ISPV regulations and guidance for further information on qualifying criteria.

In addition, an ISPV must be fully funded by way of contractual arrangements with its participants such that the ISPV’s liability to its participants is limited to its available assets.

The resulting reduced risk to vulnerable stakeholders and reduced risk of insolvency is reflected in the simplified regulatory requirements and lower fees applicable to ISPVs.

The ISPV application process is designed to facilitate fast licensing, with a target of 5 days or less from a fully completed application.

Further information

For details of the above mentioned regulations and guidance notes, and copies of application forms etc., please visit the IPA’s website.

For further information on Insurance Linked Securities, please contact John.Garland@gov.im.

Simon Pickering
Head of Insurance and Pensions

Simon-Pickering

+44 (0)1624 686063

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