Regulator the PRA still aiming for ILS “take off” in the UK

The UK’s Prudential Regulation Authority (PRA) of the Bank of England is continuing to work to simplify its approach to insurance-linked securities (ILS), still hoping the reinsurance market segment will “take off” in the country.

Speaking in March, Shoid Khan, a director of insurance supervision at the Prudential Regulatory Authority, explained that the goal is to smooth the flight path for those seeking to utilise the UK’s ILS regulatory regime.

It’s now more than five years since the launch of the HM Treasury’s Risk Transformation Regulations in December 2017.

The regulations provided for the creation and ongoing regulation of protected cell companies which could be used as insurance special purpose vehicles (ISPVs).

Feedback from the industry and a range of consultations later resulted in the PRA introducing an updated authorisation process, ultimately designed to improve speed-to-market and bring greater flexibility to the UK ILS regime.

Additional work to support the development of the UK ISPV regime was then announced last year, as the PRA hoped to “enable market participants making more informed decisions regarding their participation in the ILS market in the UK.”

It seems this work is ongoing, as Khan explained that the PRA is undertaking a range of efforts to help insurers “take off” in the UK.

Insurance-linked securities (ILS) is just one of the focus areas for PRA efforts in making the UK a more attractive place to undertake insurance and reinsurance business.

“Openness to innovation is a key feature of insurance activity in the UK, and a proportionate approach to prudential regulation supports that,” Khan explained.

Adding that efforts to “simplify expectations around the UK ISPV regime” are part of this goal to make the UK an increasingly conducive and low-friction location for re/insurers to “take off”.

“We are proposing these actions to ease ‘take-off’ for new entrants until they grow enough to be safely ‘in-flight’,” he said.

Simplifying and clarifying the ILS regulatory regime, in order to “make it easier for firms to participate in this market and allow new ways of raising capital,” is the goal, as Deputy Governor of the PRA Sam Woods had said back in February.

The PRA intends to continue its engagement with market participants to ensure the UK’s ILS regime is as accessible and useful as possible it seems, which in time could result in more ILS activity being seen.

As we also reported recently, the PRA’s new business plan sees it promising a fast-track authorisation process for what it deems to be “credible” sponsors of ILS.

Also read:

UK regulator to offer accelerated ILS authorisation for “credible” sponsors.

UK regulatory approach to ILS deemed “not fit for purpose”.

PRA’s work on UK ILS market continues with consultation on ISPVs.

PRA to bring “flexibility & speed” to UK ILS, fast-track standard structures.

Regulators “inflexible culture” hindered UK ILS ambitions: Lords Committee.

PRA looks to evolve UK ILS regime, after challenging start: Sweeney.

ILS an example of UK regulations failing to support industry: LMG CEO.

UK’s PRA wants to improve ILS authorisation process and speed.

UK Gov committee approves plan to exempt ILS from Stamp Duty taxes.

UK needs “flourishing insurance securitisation market” – TheCityUK.