The Guernsey Financial Services Commission has today issued feedback on comments received on its proposals to amend the framework underlying the Insurance Business (Bailiwick of Guernsey) Law 2002 (the “Law”) with the making of rules for Special Purpose Insurers and a related, minor amendment to the Insurance Business (Solvency) Rules 2015.
The final version of the Insurance Business (Special Purpose Insurer) Rules 2016 (the “Rules”) is provided in an Annex to the feedback document. The Rules will come into effect on 1 January 2017. The Insurance Business (Solvency) Rules 2015 will also be amended to change the definition of a Category 6 insurer to include an SPI.
The purpose of the Rules is to formally reflect the Commission's expectations and the application of its discretionary powers under the Law as they relate to certain types of insurance linked securities business in Guernsey, including collateralised reinsurance, catastrophe bonds, side-cars and life based securitisations.
The majority of Special Purpose Insurance vehicles in Guernsey are fully collateralised to the extent of their liabilities and their liabilities are also contractually limited to their available assets, meaning that unlike traditional insurers, they generally carry no risk gap between their liabilities and assets. Applying a risk-based approach, it is therefore appropriate and proportionate for the Commission to set out specific rules which apply to such structures. These Rules represent a clarification and codification of the manner in which the Commission already applies its discretionary powers and has done for a number of years.