Feedback on the Consultation Paper on Rules for Special Purpose Insurers (2016-12-09)

Summary

This is the Commission's feedback paper following its October to November 2016 consultation on new rules for Special Purpose Insurers (SPIs), together with the final text of the Insurance Business (Special Purpose Insurer) Rules 2016 annexed. It summarises the small number of responses received, the Commission's replies, and confirms the final Rules and their commencement.

• Purpose: Creates a distinct regulatory framework for Special Purpose Insurers to help attract Insurance Linked Securities business (e.g. collateralised catastrophe reinsurance) to Guernsey.
• Definitions clarified: SPI, Fully Funded Special Purpose Insurer, Qualified Investor and related terms are defined; subordination of capital-provider claims is clarified to apply to claims against insurer or cell assets, not only to insured parties.
• Capital raising restrictions: SPIs may only raise underwriting capital from Qualified Investors, via listing on a licensed or recognised investment exchange, or by other means approved in writing by the Commission; permitted contingent assets include Type 1 letters of credit, reinsurance and partly paid shares.
• Application and notification duties: Applicants for a new SPI insurer or cell must notify the Commission of SPI status and provide information demonstrating compliance; protected cell companies with standing consent for further SPI cells must notify the Commission within seven calendar days of a further cell's effective underwriting date, with an application form, business plan, fee and confirmation of the effective date.
• Governance requirement: All bank payments made by an SPI require authorisation from at least one Guernsey resident signatory.
• Related rule change: The Insurance Business (Solvency) Rules 2015 will be amended from the same commencement date so that the Category 6 insurer definition includes an SPI.

The final Rules came into force on 1 January 2017, alongside the consequential amendment to the Solvency Rules 2015.

Key obligations

• An applicant for a new insurer licence or new cell meeting the SPI definition must notify the Commission of its SPI status within the application and provide information demonstrating compliance with the Rules and the Law.
• Where the Commission has granted a single consent for further SPI cells, the General Representative must, within seven calendar days of the effective date of insurance underwritten by a further cell, notify the Commission and provide a completed application form, a narrative business plan, the relevant fee, and confirmation of the effective date of insurance.
• Further SPI cells' business must comply and continue to comply at all times with the terms and limits of the business plan submitted under section 11 of the Law and with the Rules.
• Ownership of further SPI cells must be restricted to existing owners of previously approved cells of the same SPI.
• SPIs may only raise underwriting capital from Qualified Investors, by listing on a licensed or recognised investment exchange, or by other means approved in writing by the Commission.
• All bank payments made by a Special Purpose Insurer require authorisation from at least one Guernsey resident signatory.

Applies to

Special Purpose Insurers, insurers, protected cell companies, cells of protected cell companies, General Representatives of Special Purpose Insurers

Deadlines

• 1 January 2017: Commencement date of the Insurance Business (Special Purpose Insurer) Rules 2016 and of the related amendment to the Insurance Business (Solvency) Rules 2015 (Category 6 insurer definition to include an SPI).
• within seven calendar days of the effective date of insurance underwritten by a further cell: General Representative must notify the Commission and provide application form, business plan, fee and confirmation of the effective date of insurance for a further SPI cell created under a standing consent.