First published in Trading Risk, June 2019
The ILS market has broadly welcomed moves by the Bermuda
Monetary Authority (BMA) to create a new
collateralised insurance vehicle, but opinions vary on whether the
new rules will prove to be onerous.
Questions also remain around what may happen in any transition
period.
Bermuda's legislation for Special Purpose Insurers
(SPI) was created when most ILS deals were simple
cat bond transactions. Since then, so-called
"unrestricted" SPIs have been adapted to use for more
complex collateralised deals while some managers have also moved to
set up commercial insurers of class 3A or above.
The proposed Limited Purpose Insurer (LPI) has
been positioned as an interim step between SPIs and commercial
insurers – but crucially it does not provide Solvency II
equivalency.
