The International Association of Insurance Supervisors (IAIS) has said that it is preparing guidance to the regulatory and supervisory community in relation to insurance securitisation which is expected to be finalised in 2011.
The announcement was included in the IAIS’s Global Reinsurance Market Report “Developments in (Re)Insurance Securitisation”, published on 26 August 2009. The report considers regulatory developments addressing insurance securitisation in a number of European Member States, the United States, Cayman Islands and Bermuda and notes that these developments have followed national policies, resulting in a variety of dissimilar frameworks and approaches, although a number of common themes emerge from most regimes, including the creation of a special purpose insurance vehicle.
The report considers the implications arising from a number of key transactions in the sector, including:
- Kamp Re, a Zurich-sponsored indemnity based cat bond that paid out in December 2007
- Willow Re, a Lehman Brothers backed bond which has defaulted on coupon payments
- Ballantyne Re, where a significant amount of the vehicle’s assets were held in subprime and Alt-A mortgage backed securities.
The report notes that cross-sector risk transfer appears to be benefiting the insurance and reinsurance markets, although (because there have been a very limited number of cases in which the risks transferred to the capital markets have materialised) the report also calls for prudence.