Insurance & Reinsurance 2019 Comparisons

Last Updated January 25, 2019

Law and Practice


Debevoise & Plimpton LLP (London) A premier law firm with market-leading practices and a global perspective, Debevoise has approximately 700 lawyers working in nine offices across three continents, within integrated global practices, and serves clients around the world. The lawyers prioritise developing a deep understanding of the business of their clients and then pursue each matter with intensity and creativity to achieve optimal results. Since opening in 1989, the London office – the firm’s second-largest – has developed remarkable talent and experience in Debevoise’s core practice areas, including private equity, insurance, international disputes and investigations, financial institutions, M&A, finance, capital markets and tax. Market wise and expert in English and European law, the London office is an integral part of a closely co-ordinated global practice that includes colleagues in Europe, the USA and Asia.

The Financial Services and Markets Act 2000 (“FSMA”) is the principal source of law governing insurance and reinsurance in the United Kingdom.  FSMA and related regulations provide the main framework for the UK’s regulatory regime, but a large proportion of the law applicable to (re)insurers in the UK is provided by, influenced by, or derived from European Community legislation, the most significant source being EU Directive 2009/138/EC, commonly known as Solvency II.  Having come into effect on 1 January 2016, Solvency II has been transposed into UK law in a number of ways: through FSMA itself, in statutory instruments (the Solvency 2 Regulations 2015 (SI 2015 No. 575)), as well as through new rules in the UK regulators’ “rulebooks.”  (Re)insurers in the UK, as in other European jurisdictions, are also subject to directly applicable Regulations made under Solvency II, notably Delegated Regulation (EU) 2015/35, and should also consider relevant guidance, including from the European Insurance and Occupational Pensions Authority (EIOPA).

These sources may be supplemented by UK legislation in respect of other specific aspects of insurance business, including, for example, the Insurance Act 2015, which reformed insurance contract law.

The UK is a common law jurisdiction, so as well as statute, precedent judicial decisions have an impact on the development of the UK’s legal system.  In the context of insurance and reinsurance, this may be particularly relevant in determining how insurance contracts are interpreted and in filling any interpretation gaps left by statute.

Under FSMA, insurers and reinsurers in the UK are regulated by both the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), which are responsible for authorised firms’ prudential regulation and conduct supervision, respectively.  UK (re)insurers are therefore often referred to as being “dual-regulated.” Insurance intermediaries, such as brokers, are regulated by the FCA only. 

The PRA and FCA are both subject to the direction of the Bank of England and must cooperate and coordinate their activities.  The PRA Rulebook, the FCA Handbook and associated supervisory statements are important sources of detailed rules and guidance on governance, capital and conduct of business requirements for the financial services firms to which they apply, including (re)insurers. 

The specialist (re)insurance market, Lloyd’s of London (Lloyd’s), is also regulated by the PRA and FCA, and (re)insurers who participate in the Lloyd’s market will also be subject to Lloyd’s supervision.  For example, managing agents at Lloyd’s are supervised by the Society of Lloyd’s, as well as being dual regulated.

As a result of the “general prohibition” in section 19 of FSMA and related provisions, a firm seeking to conduct (re)insurance business in the UK must obtain authorisation or permissions under Part 4A of FSMA from the PRA (unless it is exempt or can rely on the EU’s passporting regime, as to which, see section 3 below).  The FCA must consent to the PRA’s granting authorisation.  Insurance intermediaries apply to the FCA rather than the PRA.  To obtain authorisation, a firm must be able to satisfy the “threshold conditions” set out in FSMA on an ongoing basis.  These include (i) legal status, ie being a company, friendly society or member of Lloyd’s; (ii) demonstrating that the firm’s head office and registered office is in the UK or that it carries out business in the UK; (iii) the firm being adequately capitalised to conduct the (re)insurance business in question; and (iv) the individuals who manage the firm being fit and proper and suitably qualified to do so.

The PRA-regulated activities that are referred to broadly above as “(re)insurance business” are set out in the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013, and include effecting or carrying out contracts of insurance (in other words, entering into or performing contracts of insurance, respectively) and managing the underwriting capacity of a Lloyd’s syndicate as managing agent at Lloyd’s. 

A regulated activity is subject to the general prohibition to the extent that it is carried on “by way of business” in the UK.  This restricts the applicability of the rules to persons who undertake the activity in a commercial context and with some degree of regularity.  Assuming the activities themselves are carried out in the UK, it is irrelevant that the underlying risks may be located outside the UK or the contracts subject to a different governing law.  By the same token, if the activity is not carried on in the UK, authorisation is not required under FSMA even if policyholders and/or the underlying risks are located in the UK.

Statute does not fully define the term “contract of insurance” – the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 does not set out the features that determine whether a contract is an insurance contract, so it is useful to look to the common law and judicial precedent for this analysis.  Although the regulator may make its own interpretation of the case law to decide whether a contract is a contract of insurance and therefore subject to regulation, this is open to challenge in court.

A firm will need to seek PRA authorisation for each class of business it intends to write.  FSMA divides insurance business into 18 distinct classes of general business and ten classes of long-term (or life) business. 

UK (re)insurance companies are subject to the capital requirements contained in Solvency II, as set out and expanded upon in the PRA Rulebook.  There are basic requirements that apply to all authorised (re)insurers plus additional and different requirements for general insurers, life insurers and pure reinsurers, and the PRA can impose additional capital requirements on individual firms if necessary.  The capital requirements under Solvency II consist of the minimum capital requirement (MCR) – being the minimum amount of capital a (re)insurer needs to cover its risks – and the solvency capital requirement (SCR) – being effectively the amount of capital a (re)insurer needs to operate as a going concern, assessed on a value at risk measure.  A firm’s SCR can be calculated according to a standard formula, or, with PRA approval to do so, using its own internal model, tailored to the firm’s risk profile.  Capital requirements apply at both the entity and group level.

Solvency II and the PRA Rulebook also provide the requirements as to reserves to be maintained by UK (re)insurance companies.  Reserves, or technical provisions, must be calculated in a prudent, reliable and objective manner, with the value of the technical provisions corresponding to the amount the (re)insurer would have to pay if its (re)insurance obligations were immediately transferred to another Solvency II firm.  Technical provisions must represent a best estimate, as well as including an additional risk margin, calculated in the prescribed manner.

There is no different regulation specifically for writing excess of loss layers in the UK and authorisation requirements apply equally to insurers and reinsurers.  A contract of insurance in the legislation includes a contract of reinsurance, although a company may be licensed as a “pure reinsurer” and therefore not permitted to write direct business.  It is worth noting, however, that fewer of the conduct rules apply to reinsurers, or in the context of insureds being large companies, rather than individual policyholders. Therefore, excess of loss reinsurance may be subject to lighter regulation, for example not being subject to all the consumer conduct rules.  Since the introduction of the Insurance Act 2015, which applies to business insurance and reinsurance contracts and contains the duty of fair representation of the risk, as well as specifying remedies the (re)insurer has for a breach, there has been a move away from (re)insurers being favoured under the common law on insurance contracts.

The Insurance Act 2015 followed on from other changes to amend the common law and insurance contracts in favour of consumers, including the Third Parties (Rights against Insurers) Act 2010, which made it easier for third parties to claim directly against insurers (on liability insurance) where the insured was insolvent, and the Consumer Insurance (Disclosure and Representations) Act 2012, which curtailed an insurer’s rights to avoid the contract at common law.

Insurance premium tax (IPT) derives from European Community law and was introduced in the UK by the Finance Act 1994.  IPT is a tax on premiums paid under taxable insurance contracts, and applies to all contracts of insurance (but not reinsurance), wherever written or wherever the insurer or insured is located.  There are certain exempt contracts, including an exemption where the contract relates to a non-UK risk.  IPT is generally payable by the insurer (or in some cases by a taxable intermediary).  There are two different rates of tax that may be applicable – 12% (standard rate) or 20% (higher rate) of the premium paid to the insurer (or taxable intermediary), depending on the type of insurance contract and who arranges it. 

The starting point for firms deemed to be carrying on (re)insurance business in the UK (even if they do not have a permanent establishment in the UK, for example, by acting through agents) is that authorisation under FSMA is required. 

Business Not Carried On In the UK

As noted in section 2 above, a risk in the UK can be insured without UK authorisation if the regulated activity is not being carried on in the UK, ie neither the “effecting” nor “carrying out” takes place in the UK.  It may be possible for overseas (re)insurers to arrange to carry out their business in such a way that they are not deemed to be doing so in the UK itself, thereby avoiding the need for approval under FSMA.  This may not be an entirely straightforward approach, however, given that (i) the position is not entirely certain (there is a significant amount of guidance from the regulators and case law around what activities constitute “effecting” or “carrying out” a contract of insurance and whether business is therefore being carried on “in the UK”); and (ii) under FSMA, permission may still be required for other activities connected to the main regulated insurance activities.  For example, making arrangements in the UK in connection with the effecting of a contract of insurance is an FCA authorised activity and would require permission.

EEA Passporting

Firms established and authorised outside the UK but within the European Economic Area (EEA) are exempt from the requirement for UK authorisation under the passporting regime.  This means these firms may conduct business in the UK (or any other host Member State) on a cross-border basis, either by way of freedom of services (providing services with no permanent physical presence in the host state) or freedom of establishment (setting up an establishment, a “branch,” in the host state). 

A key feature of passporting is that the home state regulator authorises and supervises the firm, and the host state regulator relies on such authorisation and supervision.  The PRA and FCA’s role in relation to firms passporting into the UK principally entails reporting information to the home state regulator and exercising power on their behalf. Certain provisions of FSMA allow the PRA and FCA to assist a home state regulator on request, exercise regulatory functions on their behalf or take action against the firm for contravening FSMA.

No permission need therefore be sought from the PRA by firms passporting into the UK; instead an informational notification process applies. Broadly (and with some differences for reinsurance), the firm will notify its home state regulator, who then issues a “consent notice” to the PRA.  The firm may then start its activities, subject to any conditions imposed by the UK regulators. 

Under Solvency II, prudential supervision is dealt with by a firm’s home state, but conduct matters are often dealt with by the host state.  Under “general good” Solvency II provisions, the FCA (which is responsible for conduct supervision) may impose additional consumer protection or conduct measures on firms passporting into the UK where supervision of the matter has not been reserved to the home state regulator. 

Third-country Branches

Non-EEA (ie third country) insurers may apply for authorisation to establish a UK branch if they meet the relevant regulatory requirements to do so.  There are certain distinctions under Solvency II – for example, a single branch cannot carry out both life and non-life insurance activities in the same EEA Member State (subject to certain “grandfathering” provisions), and the Directive sets no particular standards for pure reinsurers to establish a branch (Solvency II just requires that pure reinsurers from third countries should not be treated more favourably than an EU pure reinsurer relying on passport rights).

The PRA recommends that a third country insurer or reinsurer intending to establish a UK branch should contact the PRA and engage in pre-application discussions to ensure that the application process is efficient.  In this way, applicants can better understand the overall authorisation process and prepare a suitable application that meets the PRA and FCA’s requirements.  The regulators will discuss the authorisation process with the applicant, assign a case officer to discuss and confirm information and documentation submission requirements, and answer preliminary questions. 


As an EEA Member State, the UK is subject to the equivalence regime under Solvency II, whereby the European Commission may formally recognise a third country’s solvency and prudential regime as equivalent to the framework in the EEA.  The objective here is to avoid unnecessary duplication of regulation, given the global nature of the insurance industry.  Equivalence is assessed in three separate areas – reinsurance, solvency calculation and group supervision.  Equivalence may be granted on a full, temporary or provisional basis.  Switzerland and Bermuda currently have full equivalence.

Equivalence does not permit a third country insurer or reinsurer to carry on business in the UK.  To do that, it would still need to authorise a branch or subsidiary.  Rather, equivalence affects group supervision, group solvency calculations and credit given for reinsurance from a reinsurer located in an equivalent jurisdiction.

There is no statutory or regulatory prohibition on fronting in the UK.  Historically the UK regulators have tended to look unfavourably on the practice, but it is possible and indeed a number of financial guaranty firms entered into fronting arrangements, whereby business was written in the UK and 100% reinsured back to the parent entity.  The Financial Services Authority (the PRA and FCA’s predecessor regulator) had concerns around counterparty credit risk of the non UK parent and the possible risk of UK policyholders not being paid, which was perceived as less of an issue for commercial lines such as financial guarantees, particularly where obligations were collateralised.  At that time, this concern was dealt with in the regulator’s rulebook through a presumption that reinsurance above a certain amount of reserves assumed too much credit risk unless it could be justified and mitigated, for example by collateral or a guarantee. 

In practice, the FSA would usually expect retention of at least 10% of the risk (as a general rule of thumb) and the PRA generally follows a similar approach, expecting individual reinsureds to justify and manage their reinsurance credit exposure. 

This figure has also been raised more recently as “a good referential” by EIOPA in its Brexit guidance, where it warned UK insurers to avoid fronting in their post-Brexit EEA headquarters and suggested 10% retention as a minimum to EEA regulators.

Despite the uncertainties of Brexit, there have been a number of very large acquisitions in the UK insurance sector this year. Deals have been driven by cheap financing, the perceived importance of scale in some sectors, hedging against the future in the use of technology, regulatory and capital pressures and the desire to enter new markets and have global reach. The sustained low interest environment has undoubtedly also increased pressure on insurers and reinsurers to refine their business models, increase scale and/or exit classes of unprofitable or non-core business.

The life insurance sector has seen considerable activity following implementation of Solvency II, with a number of insurers exiting lines of business with higher capital requirements such as annuities or other products with long-term guarantees. There has also been an effect on the run-off market as firms look to be as capital efficient as possible in a low interest, low growth environment and offload non-core business through share sales, reinsurance or business transfers, or often a mixture of the two latter approaches. Both the Prudential and Standard Life in the UK have offloaded large blocks of life and annuity business to Rothesay Life and Phoenix respectively, and Legal & General has sold its mature savings business (comprising around GBP33 billion of unit linked and GBP21 billion with policies business) to Swiss Re. These deals can release significant amounts of regulatory capital that the insurer can then deploy elsewhere in new opportunities.

Consolidation in the broker market is ongoing and is likely to continue as the market adjusts to regulatory change and the challenging economic environment, as is the acquisition and investment activity in “insurtech” businesses (see section 10 below).

In the non-life sector there continue to be a number of acquirers interested in Lloyd’s of London businesses. Membership of Lloyd’s gives a presence in the global insurance, reinsurance and specialty markets using Lloyd’s international licenses and capital rating and thus avoiding the need for separate authorisations and individual capital requirements in each country an acquirer may wish to expand into.

Much M&A activity has been driven by financial investors with plenty of capital and an interest in the insurance sector; these include private equity and hedge funds as well as Canadian pension funds and sovereign wealth funds. These investors are interested across the insurance sector, in brokers, Lloyd’s, life and non-life businesses, and we expect this interest to continue in the future.

Insurance and reinsurance distribution in the UK takes place through a wide variety of channels, including through direct sales, brokers acting on behalf of their clients in arranging insurance or reinsurance cover, agents acting on behalf of the insurer or reinsurer, independent intermediaries, banks (through bancassurance or partnership arrangements), various retailers in connection with retail products being sold, and increasingly online sales, often through comparison websites, particularly for motor and home insurance.

Distribution in the Lloyd’s market takes place through brokers and insurance agents or coverholders, holding binding authorities on behalf of the managing agents/syndicates for whom they underwrite. Such intermediaries have to be separately approved by Lloyd’s in addition to any other intermediary authorisation required in the jurisdictions where they operate. There has been significant consolidation in the broker and intermediary sector in the UK, as there has been elsewhere. Intermediaries can range in size from single individuals through broker networks to large global operations such as Aon, Marsh & McLennan and Willis Towers Watson.

Regulation of distribution in the UK is based on the Insurance Distribution Directive (the IDD),  which replaced its predecessor, the Insurance Mediation Directive,  entering into force on 22 February 2016 and applying to relevant firms in the distribution chain from 1 October 2018. The IDD aimed to improve intermediary regulation in Europe to cover all sellers of insurance, including insurance companies themselves, and ensure the same level of protection for consumers regardless of the distribution channel used. In the UK, intermediation by insurers and reinsurers was already regulated and so fewer changes were required to implement the IDD than might otherwise have been the case.  The IDD is implemented in the UK through FSMA and associated statutory instruments as well as through the FCA Handbook, which sets out rules and guidance for the conduct of insurance intermediation activities in the UK. The FCA is responsible for the authorisation and both the prudential and conduct regulation of intermediaries operating in the UK. Every person in the intermediation chain from customer to insurer must either be authorised or exempt. Intermediation is defined widely to include arranging a contract of insurance, making arrangements with a view to someone entering into a contract of insurance, dealing in a contract of insurance as agent, advising on a contract of insurance or assisting in the administration and performance of a contract of insurance.  A contract of insurance includes a contract of reinsurance, although a lighter conduct regime applies to reinsurance intermediation.

Rules for intermediaries range from compliance with capital and professional indemnity insurance requirements through training and competence requirements to information required to be provided to potential customers, which varies with the type of intermediary, business and customer.

The Insurance Act 2015 (“IA 2015”), which came into force on 12 August 2016, reformed UK insurance contract law in relation to misrepresentation and non-disclosure in commercial contracts. It applies to all insurance contracts entered into wholly or mainly for the purposes of trade, business or profession that are entered into or varied after that date.

The Consumer Insurance (Disclosure and Representations) Act 2012 (“CIDRA 2012”), which came into force on 6 April 2013, provides clarity to consumers on what information they need to provide to insurers when taking out an insurance policy.

No information is available.

An insurance intermediary may be acting on behalf of the insurer or the insured, depending on the nature of its contractual relationship. Where an insurance broker is acting on behalf of the insured, its duty is to exercise reasonable care and skill in the fulfilment of its instructions and the performance of its obligations. An insurance broker is also under a duty to ascertain its clients’ insurance needs carefully and to use reasonable skill and care to obtain insurance that meets those needs, together with carefully reviewing the terms of any quotations or indications given to its clients. An insurance broker must also ensure that it explains to its client the terms of the proposed insurance to ensure the client is fully informed and satisfied that all its insurance requirements are met.

At common law there is no requirement for a contract of insurance to be in any particular form or even to be in writing, although there is usually a document (called a policy) that evidences the contract. Some insurance contracts, such as contracts for marine insurance, are required by statute to be expressed in a policy. 

The material terms of a contract of insurance are the definition of the risk to be covered, the duration of cover, the amount and method of payment of the premium and the amount payable by the insurer in the event of an insured loss.

No information is available.

No information is available.

The term “Alternative Risk Transfer” or “ART” encompasses a number of alternative techniques used to transfer risk as compared with traditional contracts of insurance or reinsurance. As such, the type and structure of an ART transaction will affect its regulatory treatment. Insurers and reinsurers in the UK market, and particularly in the London market, have used ART for a number of years and provided the technique used includes some transfer of risk, regulatory credit will be given for that transfer provided it meets the specific criteria set out in the Solvency II delegated regulation, Commission Delegated Regulation (EU) 2015/35 of 10 October 2014, which is directly applicable in the UK as throughout the rest of Europe. The Solvency II regulation explicitly recognises risk-mitigation techniques used to transfer a variety of risks, including underwriting risk, but only if they fulfil the relevant criteria.

Industry loss warranties are a type of contract that pays out, often a fixed sum, on the occurrence of a market loss of agreed severity in response to certain catastrophe events. These might also be a double trigger of loss to the (re)insured in addition to market loss. ILWs have been around for a number of years and can vary both as to triggers and payment amounts. There can, however, be considerable basis risk, ie the risk that whatever loss the (re)insured suffers will not be fully compensated by the ILW recovery because the two do not exactly match or because the market trigger has not been reached. They may not, therefore, attract much Solvency II credit and for that reason it may be that there will be more careful matching of triggers and more pay-outs based on indemnity rather than fixed sum pay-outs.

A new onshore ILS regime has been implemented in the UK with effect from 4 December 2017. The UK regime is set up to be fully compliant with Solvency II rules on special purpose vehicles and therefore the appropriate reinsurance credit under Solvency II should be received.

ART transactions from other jurisdictions will be treated as reinsurance for UK cedants if the contract can be shown to fulfil the common law definition of insurance and also fulfils the Solvency II delegated regulation requirements for recognition as a risk mitigant. ART transactions structured as a derivative contract can also be recognised as a risk mitigant, similarly if they fulfil the conditions for derivatives as risk mitigants in the Solvency II regulation.

Insurance contracts are construed according to the principles of construction generally applicable to other contracts. The following general rules of construction apply:

  • Words will be given their ordinary meaning. However, they will not be understood in isolation, but in the context of the contract.
  • Where words have a technical meaning in law they will be taken to bear that meaning. If words are defined in the contract, their own definitions will prevail.
  • When construing the contract, the court may consider evidence of background circumstances (the factual matrix).
  • If words are ambiguous, they will be construed contra proferentem so that any reasonable ambiguity in the wording will be construed in favour of the insured.
  • The contract will be construed in accordance with sound commercial principles and good business sense.
  • The contract will be construed in a manner that avoids unreasonable results, provided “no violence” is done to the words used.
  • Terms may be implied if this is necessary to give business efficacy to the contract. However, no term will be implied unless it is reasonable.

The purpose of warranties is to circumscribe risk. Section 33(1) of the Marine Insurance Act 1906 defines warranties as terms by which the policyholder undertakes to do or not do some particular thing, or that some condition will be fulfilled. IA 2015 reformed the law of warranties and remedies for fraudulent claims in relation to both consumer and business insureds.

IA 2015 abolished the so-called “basis of contract” clause in insurance contracts that turns an insured’s representations into warranties. Breaches of warranty that are irrelevant to the loss that occurs will no longer discharge insurers from liability as was the case previously.

Where the insured can demonstrate that failure to comply with a contractual term, including a warranty, could not have increased the risk of the loss that occurred, insurers will no longer be able to rely on the breach to exclude, limit or discharge its liability. A breach of warranty will discharge the insurer from liability for loss occurring after the breach. It will not discharge the insurer from liability for loss occurring before the breach or after the breach has been remedied.

Fraudulent Claims

IA 2015 enables insurers to treat the insurance contract as terminated from the date of the fraudulent act. The previous common law position of insurers not being liable for fraudulent claims and being able to recover payments made to the insured in respect of a fraudulent claim will remain unchanged.

Contracting Out of IA 2015

In consumer contracts, any attempt to contract out of any part of IA 2015 will be of no effect. In commercial contracts, an insurer seeking to contract out of the provisions of IA 2015 must take sufficient steps to bring the relevant opt-out term to the insured’s attention and ensure that the term is clear and unambiguous.

It is common for an insurance contract to specify a mechanism for dealing with disputes prior to resorting to litigation or arbitration.  This may range from an initial attempt to resolve the dispute through nominated senior executives or managers to other dispute resolution mechanisms such as an independent expert determination or mediation.  Whilst insurance disputes can be, and are, often litigated, it is common for commercial insurance contracts and reinsurance contracts to contain an arbitration clause providing for disputes to be settled through arbitration rather than the courts.

Consumer contracts have to contain certain provisions required by law or regulation to protect consumers.  Whilst consumer contracts are sometimes litigated, insurers must provide consumers with details of complaints procedures and their right to refer disputes to the financial ombudsman.  They are also under a regulatory duty to treat customers fairly.  Consumer disputes will therefore often be settled through internal procedures or an ombudsman ruling rather than through the courts.

Disputes over jurisdiction regarding civil and commercial matters are resolved using two principal sets of jurisdictional rules – the European regime and the common law regime.  The European regime takes priority where it applies. 

The jurisdictional rules that form part of the European regime are set out in two EU regulations. Jurisdiction in relevant proceedings instituted before 10 January 2015 is decided on the basis of the Council Regulation (EC) 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, commonly known as the 2001 Brussels Regulation. Jurisdiction in relevant proceedings instituted on or after 10 January 2015 is decided on the basis of the Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, commonly known as the Recast Brussels Regulation.

Jurisdiction in matters relating to insurance is determined on the basis of distinct rules set out in the EU regulations, which aim to protect the so-called “weaker party.” In particular, a policyholder, an insured or a beneficiary can choose to claim against an insurer in the courts of different member states, including the member state where the insurer is domiciled, the member state where the claimant is domiciled, or – in the case of a co-insurer – the member state where proceedings are brought against the leading insurer. On the other hand, an insurer can only claim in the courts of the member state where the defendant is domiciled.  Parties can depart from these rules only by agreement in prescribed circumstances.

Disputes over the law applicable to contracts concluded after 17 December 2009 are resolved on the basis of the rules set out in Regulation (EC) 593/2008 of June 17 2008 on the law applicable to contractual obligations, commonly known as the Rome I Regulation.  Unlike the previous European regime set out in the Rome Convention on the Law Applicable to Contractual Obligations 1980 (transposed in the United Kingdom through the Contracts (Applicable Law) Act 1990), the Rome I Regulation applies to insurance contracts with the exception of certain life assurance contracts.

Civil litigation in England and Wales is adversarial in nature.  The first stage in typical court proceedings is the issuance of a claim form, which contains the names of the parties, details of the claim and its value.  The claimant then serves the claim form on the defendant, and must also prepare and serve the particulars of the claim, stating the facts on which it relies, the remedy sought, and any other relevant information.  Legal argument will usually be reserved for the actual trial.

The defendant can choose to defend against the claim by serving a defence.  The claimant can reply to the defence.  If the defence includes a counterclaim, the claimant’s reply must also include a defence. 

Next steps include disclosure, when each party is required to disclose to the other documents within its control that are relevant to the issues in dispute.  The disclosure obligation in English litigation is wide and requires each party to disclose documents that support or harm their case or their opponent’s case.  Parties will also typically exchange witness statements on issues of fact and expert reports. 

The case will then proceed to trial.  English trials principally involve each party’s counsel making oral submissions and drawing the judge's attention to the relevant evidence and law, including calling on the evidence of witnesses and experts that they seek to rely on and cross-examining opposing witnesses and experts.

The parties must take each step within prescribed periods of time set out in the civil procedure rules, or decided by the court, including in case management conferences (CMC) where the parties and the judge decide how the case should be conducted going forward, including setting a timetable for all the steps up to trial.

If an unsuccessful party does not voluntarily comply with the judgment of the court, various enforcement procedures are available, including the seizure and sale of that party’s assets or the imposition of a charge over certain assets.

Foreign judgments can be enforced in England and Wales.  However, the rules governing the recognition and enforcement of foreign judgments will vary depending on the foreign jurisdiction:

  • Judgments from the rest of the UK are enforced under the EU regime;
  • Judgments from the EU, Norway, Iceland and Switzerland are enforced under the European regime, mainly the Recast Brussels Regulation, the 2001 Brussels Regulation, and the 2007 Lugano Convention;
  • Judgments from most commonwealth countries are enforced under the statutory regime; and
  • Judgments from other countries, including the US, are enforced under the common law regime. 

Under the European regime, the judgment creditor requires the leave of the court to enforce a foreign judgment, following which it can be enforced as if it were an English judgment. Under the Recast Brussels Regulation, the judgment creditor needs to provide the enforcing authority (and the judgment debtor) with a certificate from the court of origin, certifying that the judgment is enforceable and contains relevant details, as well as an authenticated copy of the judgment and a translation, if relevant.  Under the 2001 Brussels Regulation, the judgment creditor is also required to obtain a declaration of enforceability from the enforcing state, but this requirement was removed under the Recast Brussels Regulation to streamline enforcement.

The judgment debtor can apply to the court where enforcement is being sought, requesting that enforcement is refused.  The grounds for refusal are limited and do not allow the enforcing court to revisit the merits of the judgment.

Arbitration clauses in commercial insurance and reinsurance contracts can be enforced in the same way as arbitration clauses in other kinds of contracts.  Indeed, arbitration is a popular method of resolving insurance disputes. The Insurance and Reinsurance Arbitration Society (ARIAS (UK)) has prepared a recommended arbitration clause, which takes into account the ARIAS Arbitration Rules and the provisions of the Arbitration Act 1996.

Under section 66 of the 1996 Act, arbitral awards can be enforced as a judgment with leave of the court, whether they are domestic or foreign.

The United Kingdom is a signatory to the New York Convention, which entered into force on 23 December 1975, with a reciprocity reservation. The United Kingdom has submitted notifications extending the territorial application of the New York Convention to Gibraltar, Isle of Man, Bermuda, Cayman Islands, Guernsey, Jersey and the BVI.

For foreign awards governed by the New York Convention, section 103 of the 1996 Act contains the grounds of review for recognition and enforcement that are set out in Article V of the New York Convention.  In practice, the United Kingdom is an “arbitration-friendly” jurisdiction and grounds for review of foreign awards are limited.

In addition to the New York Convention, the United Kingdom is also a party to (i) the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927, (ii) the Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965 and (iii) numerous other bilateral and multilateral investment treaties.

Arbitration is commonly used in insurance and reinsurance disputes, and a clause requiring this form of dispute resolution to be used may be contained in the policy. The International Chamber of Commerce (ICC) and the London Court of International Arbitration (LCIA) are frequently used.

A contract might also require resolution of a dispute through another form of alternative dispute resolution, for example mediation. The court will encourage mediation before litigation for both insurance and reinsurance contracts and failure to do so may result in costs penalties.

The Enterprise Act 2016 introduced an implied term to (re)insurance contracts that insurers must pay sums owed to policyholders within a reasonable time. The type of insurance, the size and complexity of the claim, compliance with any relevant statutory or regulatory rules or guidance, or factors outside the (re)insurer’s control will all be taken into account when assessing what constitutes a reasonable time.

A breach of this implied term could give rise to a claim for damages. The limitation period for the insured to bring the claim for damages is one year from the date of the last payment in respect of the relevant loss (Limitation Act 1980).

Parties to a non-consumer contract can contract out of the reasonable time obligation so long as they comply with the Insurance Act 2015 transparency provisions.


InsurTech is bringing significant and unparalleled change to the insurance industry. An increasing number of start-ups are applying new technologies in the insurance space. Incumbent insurers are focused on partnering with and acquiring these businesses in order to avoid disruption, meet evolving customer demands and capitalise on InsurTech’s potential. 


Despite the insurance sector’s embrace of technology lagging somewhat behind other financial services sectors, such as banking, there has been significant growth in the pace of insurtech investment in recent years. This growth cannot be ascribed to any single factor. In all areas of insurance, technological innovation, advances in computing power and societal shifts, such as customers’ shifting preferences and expectations toward mobile and on-demand, have undoubtedly played a significant role, as have persistently soft pricing markets and low interest rates, which have created increased pressure on insurers to search for yield outside of the traditional model.

Virtually all major insurers now pursue InsurTech opportunities in some form or another.  Several of the most common strategies used by global and UK insurers are listed below, ranging from early- to late-stage investment. Importantly, these strategies are not mutually exclusive and global players typically utilise several, if not all of them, in parallel.

  • Establish incubator – it is common for insurers to establish incubators with the aim of accelerating seed or early-stage technology ventures. Incubators often take the form of external acceleration programmes that admit and train applicants, though they may equally be internal research and development outfits. 
  • Venture capital investment – insurers now routinely make strategic venture capital investments in InsurTech start-ups. These investments are made either directly through a business unit or through a standalone venture capital-focused investment fund. 
  • Partnerships – partnerships play an enormously important role in the InsurTech space, whether between insurers and new entrants, or insurers and large technology companies. By allowing incumbent insurers and disruptors to combine resources, partnerships offer potential benefits to both incumbents and start ups. 
  • Licence technology – rather than incurring the risk and expense of growing or acquiring technology, insurers may seek to license fully developed technology from third parties. 
  • M&A – insurers also seek to acquire insurance-oriented technology companies outright and integrate them into their global brand. 


Innovators are focused on all aspects of insurance businesses. To date, however, there has been a disproportionate focus on distribution-related technologies and personal lines over commercial lines. These biases are showing signs of diminishing and the expectation is that, as the market continues to mature, InsurTech activity will balance more evenly across the insurance value chain.

Below are some of the products involved in InsurTech:

  • Artificial Intelligence and Machine Learning (together, AI) – AI promises substantial improvements in operational efficiencies and pricing accuracy. Products in this area vary, from drones analysing crop health from aerial images of farms, to companies offering a completely automated claims service. Brolly, for example, is a service that can tell you when you are over-covered or under-covered and whether there are cheaper policies suited to you.
  • Intelligent agents – virtual and digital assistants and chatbots capable of interacting with customers are becoming increasingly common. SPIXII is an insurance chatbot that guides clients to select policies, receive quotes, and decide on coverage. It can both ask and answer questions.
  • Internet of Things (IoT) and Big Data Analytics – IoT refers to the connection of devices to the internet and/or each other. Connected devices include items such as Fitbits and automobile and machine monitors. Insurers use data from wearables to project health outcomes, whilst data from vehicles can predict the likelihood of future accidents. Examples include Aviva launching a device that homeowners clip to their pipes to monitor signs of potential leaks and Sompo Japan’s partnership with Accenture to collect data from connected devices installed in taxis to provide individualised safety instructions to drivers.
  • Blockchain – Blockchain is a digital peer-to-peer ledger system designed to record securely transactions in, and ownership of, digital assets. Global and UK insurers remain focused on the technology as is evidenced by their near universal participation in the B3i initiative, which involved launching a (re)insurance contract management platform using DLT and smart contract technology.

While InsurTech is subject to the same insurance regulation as traditional insurance, there is a lack of adaptation of the rules to the InsurTech sector; the InsurTech space is not heavily regulated in and of itself. There are certain inadequacies in how much of the insurance regulatory regime deals with the problems posed by the rise of InsurTech, including its approach to licensing and authorisations for InsurTech enterprises that do not follow traditional models when contracting for and administering insurance contracts.

Efforts have been made by regulators to adapt to InsurTech, demonstrated by the launch of Project innovate by the FCA in 2014. A key component of the project is the regulatory sandbox. This involves early, open and honest communication between InsurTech firms and their respective regulators, who provide individual guidance, potential modification of rules and letters of no enforcement action for a limited duration. In exchange, the FCA closely monitors the pilot and receives information regarding current innovations. The PRA and FCA have also set up a New Insurer Start-Up Unit which has produced an online guide of all the stages in setting up an insurer, and are requesting feedback on this initiative.

EIOPA has set up an InsurTech Taskforce to assist in harnessing the benefits of InsurTech whilst ensuring consumer protection and financial stability. The Taskforce launched a survey on InsurTech on 27 June 2018, giving it to the insurance industry and InsurTech start-ups. The aim is to find out more about potential gaps and issues in the existing regulatory framework, peer-to-peer insurance, licensing requirements, legal barriers and facilitators of InsurTech.

As a centre for the global insurance and reinsurance industry, the UK industry, particularly Lloyd’s and the London market, is focused on the many emerging risks common to those in the rest of the world, climate  change changing the pattern of catastrophe and environmental risk, increasing digitalisation resulting in greater danger in cybersecurity risk and the changing risk profile of common types of insurance, such as motor and liability with the development of automation and artificial intelligence.

Cyber Risk

UK businesses have a heightened awareness of the threat that cyber-crime poses following a number of recent high profile data breaches. Amazon has recently reported a major data breach where customers’ names and addresses were published on its website, following a breach by British Airways where around 380,000 payment cards were compromised as part of a two-week cyber-attack on its website and app. Dixons Carphone also admitted a data breach in the previous year which involved around ten million customers. The recent joint report on cyber threat to UK business from the National Cyber Security Centre (NCSC) and the National Crime Agency (NCA) acknowledged the pace at which cyber threats evolve and urged collaboration between government, law enforcement agencies and business to tackle this universal threat.  The NCSC has publicly stated it has been involved with, or defended the UK from, over 1,100 cyber-attacks in the past 24 months to October 2018.  Whilst (re)insurers face cyber risks themselves, it is also an opportunity for them to offer cyber risk insurance protection to others. The coming into force of the GDPR in 2018 will impact the standard of cyber security protections that firms must attain, which will ultimately benefit (re)insurers offering cyber risk cover.

The UK government is committed to making the UK a leader in cyber security and the FCA and PRA are both alive to the risks that financial services firms, such as insurers, face from cyber threats. The PRA and FCA are engaging with industry and cooperating with each other and the Bank of England to monitor the use of new technologies, assess emerging regulatory risk and test firms’ operational and cyber resilience through stress tests – and enforcement and fines when regulatory and data breaches occur.   

In July 2017, the PRA published a Supervisory Statement setting out its expectations on the identification, quantification and management of cyber insurance underwriting risk. The statement applies to life and non-life (re)insurers within the scope of Solvency II, including the Society of Lloyd's and managing agents that write contracts of insurance that are exposed to cyber-related losses resulting from malicious (ransomware attacks) and non-malicious (corruption of data) acts. 

Longevity Risk/Bulk Annuities

While there may have been a plateau noted in the most recent UK longevity figures available, given the long-term trend of increasing life expectancy, longevity risk (the risk that individuals live longer than anticipated) remains a key risk for life insurers as well as pension funds, annuity providers, and investors in these markets. These firms have liabilities contingent on longevity and therefore need to set aside reserves to meet their future payment obligations. Additionally, UK reforms of the pension markets announced in 2014 (which gave individuals the right to take their pension as cash at retirement, removing the requirement to buy an annuity), led UK insurers to rethink their approach to the retirement market and their management of longevity risk. The reforms encouraged some insurers to focus on the annuity market as a way of deploying their existing skills and experience in longevity risk management to offset the decline in sales of individual annuities.  Recent market observations saw insurers continuing to achieve a market share with an active bulk annuity market and the number of “buyouts” deals (where a firm sheds its pension liabilities to an insurer) remained steady. 

Together with the prolonged low interest rate environment, regulatory treatment of long-term guaranteed products, such as annuities, has led to insurers investing increasingly in illiquid asset classes to match their long-term exposures.  Whilst the PRA acknowledges that such asset classes, such as infrastructure, commercial property and equity release mortgages can be a good match for these long-term liabilities, it is also concerned that these products can be complex and that insurers understand the risks and value the assets appropriately – including as to the credit they take in their regulatory calculations for these products – see for example, CP13/18 in section 12 below. 

Longevity risk has also been an increasing focus of the regulator in part due to the peculiarities of the Solvency II regulatory regime. 2017 saw recognition by the PRA that the design of the risk margin (which is used in the calculation of an insurer's liabilities) makes it highly sensitive to interest rate conditions to a degree that was not foreseen by the architects of Solvency II.  In the Bank of England's public response to the European Commission’s Call for Evidence on EU Financial services regulation,, the PRA noted that interest rate sensitivity, coupled with historic low rates in the UK, meant that the risk margin is disproportionally large for UK insurers writing interest rate sensitive risks that are usually long-term, ie longevity risk, annuities or savings products with a form of guarantee. The PRA also noted that the volatility was undesirable from a prudential viewpoint because of its potential to promote pro-cyclical investment behaviour of insurers. Consequently, the PRA publicly supported redesign of the risk margin to deliver more stable balance sheet outcomes for insurers and so support their key role as long-term investors in the economy. Following similar conclusions reached by the Treasury Select Committee on Solvency II, the PRA was expected to report back on a resolution to the risk margin issue at the end of 2018.

The PRA provided an update in June 2018 on its work on the risk margin issue, in a letter from BoE Deputy Governor Sam Wood. Wood explained that at present, due to Brexit uncertainties, the PRA is struggling to find a way to implement change with enough certainty that firms can rely on it. He also noted that calculation of the risk margin has pushed leading UK insurers into reinsuring a substantial proportion of longevity risk offshore, and whilst there are no immediate concerns regarding this issue, it could become a prudential concern if left unchecked. The PRA is taking an increasing interest in these transactions and insurers are required to notify the regulator of their longevity deals and the mitigating steps taken to reduce their counterparty exposure associated with offshore reinsurance. 


There are several features of DLT, such as Blockchain, that justify its reputation as offering a high standard of protection against cyber security risk.  From the sharing of identical information across networks, to the cryptography-based protections built into the technology, DLT represents an exciting development in the fight against cyber-crime, and not just for insurance industry stakeholders. The ability to protect data from cyber-attacks or malicious tampering is not only beneficial from a business risk point of view, but it also makes a product based on DLT more attractive to consumers and regulators such as the FCA and PRA who must balance innovation against risks to markets and customers.  However, weaknesses in DLT have been revealed through a series of cyber-attacks against digital currencies that use DLT. The full potential of DLT is yet to be realised and as the technology develops and matures, the cyber security tools embedded within DLT will continue to influence the adoption of DLT by UK financial services firms. 

To manage both the policy and regulatory implications of DLT and cryptoassets in financial services, the BoE, FCA and HM Treasury created a Cryptoassets Taskforce in March 2018. The Taskforce has recognised the considerable risks that come with the potential benefits of DLT and published a report in October detailing specific actions to be taken by regulatory authorities to mitigate these.

Insurance Act 2015

Having come into force in 2016, the Insurance Act 2015 (“IA 2015”) significantly reformed UK insurance contract law.  The IA 2015 applies to all contracts of insurance and reinsurance issued since August 2016.  Amongst other things, it introduced a new duty of fair presentation for insureds under business contracts, replacing the pre-contract duty of disclosure in the interests of encouraging cooperation between the parties.  The insured is required to disclose every material circumstance that it knows or ought to know, and to conduct a reasonable search of its records to discharge the duty of fair presentation.  Information should be disclosed in a reasonably clear and accessible manner (no “data dumping”), and material representations as to matters of fact should be substantially correct, and material representations as to matters of belief or expectation should be made in good faith.  In the event of a breach of the duty, in certain circumstances, the insurer can rescind the policy and retain all premiums paid.  Insurers can in some circumstances contract out of certain provisions of the IA 2015.

The IA 2015 was also amended in May 2017 under the Enterprise Act 2016 to enable insureds to claim for damages actually suffered as a result of a payment of a claim by an insurer not being made within a “reasonable time.”  What constitutes a “reasonable time” will depend on the facts in each case, but the IA 2015 gives a non-exhaustive list of factors, including the type of insurance, the size and complexity of the claim, whether relevant rules or guidance has been followed, and any factors outside the insurer’s control.


The PRA’s consultation paper on equity release mortgages (“ERMs”), CP13/18, was published in July 2018 and proposed a more cautious approach to the valuation of ERMs for regulatory capital calculations. CP13/18 proposes methodology and assumptions for valuing no-negative equity guarantees and seeks to address the possible risks to insurers investing in ERM portfolios of a stagnating housing market by ensuring that insurers do not understate their technical provisions or capital requirements.

Insurers often rely on these investments as a good match for long-term liabilities such as blocks of annuity business, and the proposed changes therefore have the potential to reduce the capital position of some insurers in the sector and to increase prices payable for annuities.

The consultation period for CP13/18 closed at the end of September 2018 and the proposals were expected to be implemented on 31 December 2018.  In October 2018, the PRA clarified that, based on feedback to the consultation, the implementation date will not be before 31 December 2019. Final policy and supervisory statements are expected shortly but had not been published when the PRA announced the delay.

Extension of Senior Managers & Certification Regime

UK insurers are currently subject to the PRA’s Senior Insurance Managers Regime (SIMR) and a modified version of the FCA’s Approved Persons regime, which impose certain regulatory responsibilities on, broadly, senior managers and persons exercising specified “controlled functions.”  On 10 December 2018, the Senior Managers & Certification Regime (“SM&CR”) will be extended to cover all PRA and FCA regulated (re)insurance firms, replacing SIMR and the Approved Persons regime. 

The objective is to heighten individual accountability and ensure policyholder protection, by subjecting the insurance industry to the same level of scrutiny as the banking sector, which has been subject to the SM&CR since 2016.  New features include the Certification Regime, handover procedures and the statutory duty of responsibility.  Almost all employees of insurers will also fall within the scope of the conduct rules.

Amongst other things, individuals in a designated senior management function will need to be pre-approved by the regulator before being appointed to their role, and will be subject to annual fit and proper assessments by their firm.  Under the certification regime, individuals who are not senior managers but whose job can cause significant harm to the firm or its customers will be certified annually by their firm to check they are suitable to do their job. 

Further requirements will also apply to the largest and most complex firms under the enhanced regime, including having in place a responsibility map and handover procedures for all senior manager roles.

Solvency II and Treasury Committee’s report

The Treasury Committee of the House of Commons published its report on “The Solvency II Directive and its impact on the UK Insurance Industry” in October 2017, with input from many across the insurance sector, including the Association of British Insurers.  The general tone of the report was critical of the PRA, including certain aspects of its regulation of the industry, its focus on solvency rather than competitiveness, and its implementation of Solvency II.  The report noted a number of specific recommendations for the PRA, and showed the Committee’s concern for the possible impact of Brexit. 

The PRA responded with an initial letter in January, a report in February, and an update to that report in August 2018.  The PRA’s report explains to the Committee why existing rules operate as they do and some of the constraints the PRA is under when implementing and interpreting Solvency II.  Covering the topics of the secondary competition objective, risk margin, matching adjustment, volatility adjustment and dynamic volatility adjustment, internal models and the post-Brexit landscape, the PRA also noted that it is working to reconsider certain areas raised by the Committee and will provide a further update in due course.  In many instances, the industry will have to wait and see what changes, if any, the PRA implements.  Any changes will also depend on the future of the UK with the EU post-Brexit, as discussed further below.

Insurance Distribution Directive

The Insurance Distribution Directive (IDD) replaced the Insurance Mediation Directive (IMD), with a delayed application date for firms of 1 October 2018.  The IDD is a European minimum harmonisation directive (so gold-plating by individual member states is permitted) in respect of insurance distribution regulation.  The IDD aims to create a “level playing field” between participants involved in the sale of insurance products, to strengthen protection for policyholders and to make it easier for firms to trade cross-border.  It therefore applies to insurers, insurance intermediaries, price comparison websites/aggregators and ancillary insurance intermediaries.  The new requirements include conduct rules for distributors, which vary depending on the nature of the business, customers and distribution channel used.

The impact on the UK insurance industry has not been expected to be as significant as for other member states, since the UK’s implementation of the IMD imposed higher standards than required under that directive; existing UK rules therefore already reflected the IDD requirements to a large extent.  Implementation in the UK has been through amendments to legislation and to the FCA Handbook.


The basis on which the UK will leave the European Union on 29 March 2019 is still uncertain at the time of writing. The Withdrawal Agreement currently negotiated between the UK and the EU27 provides for a transition period until December 2020, during which both sides will broadly be treated as if the UK were still a member of the EU, including the maintenance of current passporting rights for EU insurers and reinsurers, and the mutual recognition of cross-border merger and insurance portfolio transfer procedures.  However, there still remain a few outstanding issues to be agreed on the Withdrawal Agreement and there is considerable doubt at the time of writing whether the Agreement will be approved by the UK House of Commons.  It is therefore still possible that no agreement will be reached in time (a so called “hard Brexit”).  Still less clear is the nature of the UK’s future relationship with the EU27 post any transition period.

What does seem clear is that the insurance industry will lose its automatic passporting rights between the UK and the rest of the EU. Whilst the UK Government’s white paper on “The Future Relationship Between the United Kingdom and the European Union” (the “White Paper”) focuses on a proposed free trade area in goods, there is very little detail on services other than an acknowledgement by the UK Government that there would no longer be the same degree of access between the UK and the rest of the EU.

The White Paper also dismisses the “third country equivalence” regime as a suitable alternative but foresees some sort of “equivalence plus” under a bilateral framework that focuses on the regulatory autonomy of both parties but with a reciprocal recognition of equivalence. 

A short “political declaration” on the future relationship to accompany the Withdrawal Agreement is still being negotiated at the time of writing but it is likely to be some years before the detail of the future relationship is agreed.

Insurers have therefore been planning on the basis of a no deal or hard Brexit and setting up new authorised subsidiaries or branches so as to be able to access both the UK and EU markets in case required post Brexit.

The UK Government is putting legislation in place to maintain EU laws and regulations currently directly applicable in the UK, including those relating to insurance, and in particular the Solvency II regime, but without the references to EU institutions and the reciprocal arrangements which come with being a member, by incorporating these into domestic law through statutory instruments under the European Union Withdrawal Act.

The intention is, therefore, that there will be no difference in insurance regulation as it currently applies in the UK and to UK authorised insurers, immediately post Brexit, with the amendments being made purely to reflect the UK’s withdrawal from the EU and its institutions.

It is unlikely that the regulator or the UK insurance industry will wish to diverge greatly from the Solvency II regime given the amount of effort, time and money spent on its implementation.  However, there are some areas already heavily criticised by the regulator and the industry where some changes may be made; notably in the Solvency II calculation of the risk margin, the matching adjustment and the treatment of certain long-term investments.  Over time, there will be some EU derived law and regulation that the UK Government will amend or remove completely but the extent of change is likely to depend on what can finally be agreed with the EU on the future relationship.

Insurance Linked Securities Regime

The new ILS regime for the UK was implemented with effect from 4 December 2017 after a significant amount of work between the regulators, the industry and HM Treasury to design an onshore regime that would allow the UK to compete with more established ILS jurisdictions whilst ensuring that ILS issued in the UK would be compliant with the Solvency II rules on special purpose vehicles.

The new rules introduce protected cell companies into the UK for the first time together with an attractive tax regime and a bespoke approach to regulation and supervision to reflect the nature of ILS transactions.

Since its introduction, the new regime has been used for a reinsurance sidecar launched by neon to support the property underwriting of its Lloyd’s syndicate and a GBP300 million catastrophe bond issued by Atlas Capital.  There are at least two further transactions expected this year and it is hoped that more will follow.

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