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Lloyd's gauges strong ILS interest in Central Fund deal

The insurance-linked securities (ILS) market has expressed "strong interest" in insuring the Lloyd's Central Fund, according to Lloyd's chief financial officer John Parry.

The Corporation is looking at bringing in ILS capital as soon as next year to back the Central Fund, following the introduction of the UK's new ILS framework, Parry told journalists after Lloyd's published its annual results.

Parry said Lloyd's had already met with investors to discuss the possibility of involving alternative capital in the funding structures supporting the central fund.

"They already participate in the market through Nephila, Securis and Credit Suisse," said Parry, who said Lloyd's would be looking to augment the Central Fund's existing capital base, which includes subordinated debt.

Parry said that at the end of 2018, Lloyd's would begin to assess the most cost-efficient ways for the Central Fund to access capital.

"If we go ahead, we'd be looking at putting it in place for 2019," Parry said.

"As a market, we are committed to a diversity of capital providers," he added.

Lloyd's CEO Inga Beale first raised the prospect of the market tapping into ILS protection to cover the Corporation last year.

Late last year, the UK government passed legislation offering a framework for ILS risk transfer vehicles to be domiciled in the country.

Parry said: "ILS is here now. It is part of the insurance industry now. Is that another source of capital that Lloyd's can deploy to take risk?"

UK Chancellor of the Exchequer Philip Hammond and the London Market Group (LMG) invited ILS investors to a reception in Downing Street on Monday.

City Minister John Glen said: "We're committed to keeping the UK's insurance industry at the cutting edge, and the new regulations passed last year are central to this."

The chairman of the LMG's ILS taskforce, Malcolm Newman, said the group anticipated a demand for investors for onshore ILS vehicles that would make a significant contribution to growing the UK's trade.

He said: "I have no doubt the London Market will become an international centre for ILS, as we are fortunate to have a unique cluster of intellectual capital, and the presence of the world's capital providers and managers."

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