The Guernsey Financial Services Commission (GFSC) has published a new set of rules that clarify the regulatory treatment of collateralised reinsurance, including insurance-linked securities (ILS), and allow for a one-day approval process.
From 1 January 2017, under the Insurance Business (Special Purpose Insurer) Rules 2016, an applicant for the licensing of a new special purpose insurer (SPI) may be granted a single consent for the formation of further SPIs without call for further application.
The streamlined application process typically allows new insurers to be established within one business day.
The Insurance Business (Solvency) Rules 2015 have also been amended to expressly include the new class of insurer. Under the updated rules, an SPI is not required to maintain the minimum or prescribed capital requirements, nor to conduct own risk or solvency assessments.
Guernsey Finance Chief Executive Dominic Wheatley said: "These changes are a codification of the way the GFSC already applies its discretionary powers and they provide a new level of operational certainty and efficiency for the insurance sector."
SPIs must be fully collateralised to the extent of their liabilities and, in addition to ILS, may include collateralised reinsurance, catastrophe bonds, side-cars and life-based securitisations.
Typically, cash assets will be applied against liabilities. However, under the changes, the GFSC recognises that the commercial interests of the counterparties may be satisfied using (re)insurance, letters of credit or partly paid shares.