Lloyd’s Launches 2nd Protected Cell Company to Provide Greater Flexibility for Investors
Lloyd’s announced it has received regulatory approval to set up a second protected cell company (PCC), which aims to enhance market accessibility for investors – a key deliverable of the Future at Lloyd’s project.
Lloyd’s previously announced a number of successful deals through London Bridge Risk PCC (LBR) and is building on that success by sponsoring a second vehicle, said Lloyd’s in a statement.
The second London Bridge PCC (LB2) will offer a number of extensions in the coverages it can write and the way in which those obligations can be funded, together with improvements in the execution of these collateralized transactions.
LB2 will provide an access point for qualifying institutional investors, to deploy funds in a tax transparent way into the Lloyd’s market. Lloyd’s members and managing agents will be able to use the new vehicle to manage their capital and risk management requirements by attracting new sources of capital and reinsurance protection.
LB2 is authorized to undertake three additional capabilities:
- For a corporate member, in addition to writing quota share reinsurance, it will also be able to write excess of loss coverages.
- For a syndicate, it will be able to provide collateralized reinsurance, on both an excess of loss and quota share basis.
- For all structures, it will be able to fund the reinsurance obligation through the offer, by the segregated cells of the PCC, of either preference share or debt securities.
Working closely with the UK regulators – the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) – Lloyd’s has developed a set of mandatory terms for the principal transaction documentation, which will provide greater commercial flexibility while maintaining regulatory compliance. This is embodied in a “Scope of Permissions” that enables new cells to be set up and reinsurance written without the need for any additional regulatory approval, providing these permissions are complied with.
“I am delighted that we are able to build on the success of our initial risk transformation vehicle to offer the market a new vehicle with broader capabilities, thus enabling market participants to have more options to attract capital markets investors to support their underwriting at Lloyd’s,” commented Burkhard Keese, CFO, Lloyd’s said. “Both PCC vehicles will complement the more traditional approaches to deploying capital and managing risks at Lloyd’s, with LB2 offering an efficient route for institutional investors to support the growth and diversity of risks written in the market.”
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