Guernsey claims first-of-its-kind re/insurance and ILS hybrid vehicle


Guernsey has introduced a new "hybrid" ILS vehicle - a protected or incorporated cell company that is both a licensed insurance company and a regulated investment fund.

It was created by Carey Olsen partner Christopher Anderson with the support of the Guernsey Financial Services Commission, who claims "no other jurisdiction in the world offers such a unique combination".

The Guernsey hybrid means ILS managers no longer have to 'rent' cells of protected cell or segregated account companies to act as special purpose insurers, Anderson suggests.

Anderson's concept comprises of investments cells and insurances cells, with a core which houses the regulatory capital required of a licensed insurer.

The investment cells raise money from third party investors through the offer of shares or other securities. The hybrid can fundraise through any number of investment cells, and each investment cell can issue its own offering document describing its own investment strategy.

At the same time, the insurance cells in the hybrid vehicle write re/insurance contracts. Funds raised in the investment cells can be used to collateralise re/insurance written by the insurance cells through regulation 114A trusts, letters of credit, or funds at Lloyd's, for example.

"For the first time, the Guernsey hybrid provides managers with the opportunity to operate an investment fund and any number of sub-funds and SPIs in one place, supervised by one regulator, governed by one board of directors with one set of service providers and one auditor," said Anderson. "No other jurisdiction in the world offers such a unique combination."

As a licensed insurer, the hybrid must maintain minimum share capital - £100,000 for a general, £250,000 for a long-term insurer.

Carey Olsen, Christopher Anderson, ILS, Reinsurance, Guernsey, Bermuda

Bermuda Re