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Neon praises PRA for efficient ILS approval

Lloyd's insurer Neon has praised the Prudential Regulation Authority (PRA) for its efficiency in approving the first London ILS transaction.

Neon launched the UK-based sidecar, NCM Re, with $72mn of capital in January.

Speaking on 19 April at Trading Risk’s London ILS Conference, Mark Gibson, Neon reinsurance and alternative capital director, said: “Individuals read the documents quickly and came back with pertinent questions.

“The PRA said, ‘Don’t oversell what we can do.’ They probably don’t have the depth to deal with a rush of transactions,” he added.

Time was of the essence, particularly when setting up single-arrangement vehicles, said Cadwalader, Wickersham & Taft special counsel Robert Cannon, who was also on the panel.

“People want to bring a cat bond to the market when they’ve decided on the structure. They don’t want to wait six weeks between launching it and finishing the structuring,” he said, referring to the PRA’s current timeframe for approving standard transactions.

But he said the PRA is happy to sit down and talk to people before an application for approval is submitted.

“The PRA has said you can talk to us at the structuring stage. You can discuss what collateral is going to be used, you can discuss which way the risk transfer works, you can talk to us about the Solvency II rules and get feedback at that stage,” said Cannon.

The pre-application process is good as issues can be ironed out, added Brendan Roche, global ILS leader at Marsh Captive Solutions.

The UK ILS regulations do not currently allow the delivery of foreign aid via ILS, said Michael Wade from TigerRisk Capital Markets.

He called for greater industry engagement with the UK’s Centre for Global Disaster Protection to enable vulnerable countries to increase financial resilience to disasters.

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