Beale vows to reclaim ‘stolen’ ILS market

New UK regulation that would facilitate the issuance of insurance-linked securities (ILS) from vehicles based in the London Market will be critical to help London protect its status as a global hub for risk transfer, Inga Beale, chief executive of Lloyd’s, told Baden-Baden Today.

She said that Lloyd’s had been working closely with the UK government on the initiative. The aim is that a regulatory framework could be implemented as early as 2017 and Beale said she is assured this remains a government priority, despite the distractions of Brexit.

“For whatever reason it happened, I feel that Bermuda stole the ILS market from London. But we want to ensure London remains a great financial hub and this form of risk transfer represents a fantastic complement to everything that already happens in the London Market.”

She explained that bringing this form of risk transfer and the associated capital providers to London will ultimately have a positive impact on other parts of the market as that same capital eventually matures, grows and seeks new ventures.

“There is capital out there that is hungry and needs feeding; as it inevitably diversifies and requires not just new risks but actuaries and claims people, we at Lloyd’s and elsewhere in the London Market can provide all that. We have been risk experts for hundreds of years and that capital can leverage what we have here.

“London is also a very concentrated pool of talent and skills and it is a great place for that to happen. This regulation will help us grow and improve the market without Bermuda eating our lunch.”

Beale said she envisaged an ILS framework in London being used to issue bonds designed to cover risks in emerging markets as part of a wider strategy to plug the protection gap in many countries and secure growth for the re/insurance industry.

Beale has been heavily involved in initiatives of this nature. She sits on the steering committee of the Insurance Development Forum, an initiative launched by the United Nations and the World Bank Group this year help build resilience to climate risk and natural disasters and bridge the insurance protection gap for developing nations.

She also oversaw the launch of a scheme in which eight Lloyd’s syndicates joined forces to develop new solutions to help developing economies tackle underinsurance and improve their resilience against the economic impact of natural catastrophes.

The syndicates committed capacity of $400 million in 2015.

The London Market Group (LMG) formed an ILS Taskforce earlier this year led by Malcolm Newman, chief executive officer of SCOR’s London and Paris hubs, to gather expertise from accountants and lawyers. Consultations have taken place with the Treasury, Her Majesty’s Revenue and Customs, the Prudential Regulation Authority and the Financial Conduct Authority.

In September, the economic secretary to HM Treasury Simon Kirby wrote to LMG chairman Nicolas Aubert to thank the LMG and the ILS Taskforce for its work to date, saying that “we now need to move to the next phase of the project”.