Pending changes in the UK insurance market could give Britain a major edge over the US market an industry expert has argued.

In an editorial piece for Thomson Reuters Regulatory Intelligence Lawrence Hsieh, Practical Law for Regulatory Intelligence, argues regulatory changes currently being contemplated by the UK could make London a centre for insurance-linked securities (ILS) ahead of the US.

The main type of ILS is the catastrophe bond, which is designed to transform insurance risk into securities on events like hurricanes and earthquakes, and then transfers that risk to bond-buying investors. US states Delaware and Vermont have regulations that make ILS transactions relatively easy, but largely the US hasn’t attracted much ILS business. Currently, ILS tend to come from places like Bermuda and the Cayman Islands.

However, the UK government is currently working with the London market to draft regulations and a tax framework that would make London a hub for ILS transactions. If the regulations are passed, the UK would be in a far better position to attract these kind of transactions over the US.

When the new rules come into place, the UK might have a chance to steal some of the business away from the havens that currently hold the majority of the business.


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