Insights

Source: Artemis. Click here to view original publication (10th August 2016).

Exchange Re, a platform for collateralised reinsurance or cell-based ILS transactions and the first to be launched in Malta, has now received official approval to begin business by the Malta Financial Services Authority (MFSA).

Exchange Re, or Exchange Re SCC Limited to give its full name, pitches itself as the first “ILS platform in Malta for private collateralised reinsurance transactions organised as a securitisation cell company (SCC),” and launched earlier this year when it received approval in-principle from the MFSA.

Exchange Re is owned and operated by insurance and captive management specialist USA Risk, which has a strong foothold in Malta and took the opportunity to launch the first reinsurance special purpose vehicle (RSPV) on the island as it sought to capitalise on the appetite to bring ILS and collateralised reinsurance business to the domicile.

That in-principle approval has now been formalised and Exchange Re was authorised by the MFSA on Monday 8th of August 2016, giving it the go-ahead to begin facilitating ILS business in Malta, as the domicile advances its mission to become a European ILS hub.

Malta is within the European Union so could be an attractive option for ILS funds or investors looking to locate a collateralised reinsurance vehicle within the EU.

John Tortell, General Manager of Exchange Re SCC Limited, told Artemis of his pleasure in receiving full authorisation from the Malta Financial Services Authority, following the in-principle approval earlier in the year.

“We aim to provide a full quality service to clients and look to other service providers to use this open platform for their clients. In keeping with the ever developing ILS market Exchange Re and Malta offer a credible and interesting alternative Solvency II approved domicile which will attract both cedants and investors,” Tortell explained.

Dr Matthew Bianchi, an insurance partner at law firm GANADO Advocates who were entrusted with the application process and establishment of the structure stated that GANADO Advocates were; “Delighted to have supported with the set up of the first RSPV SCC ILS platform in the European Union and are confident that this vehicle will pave the way to develop a robust collateralized Reinsurance market in Malta.”

Being fully compliant with the EU Solvency II Regime could be attractive for some ceding re/insurers that want to enter into collateralised reinsurance deals with ILS funds or investors. Additionally, Exchange Re said that it aims to offer lower costs and quicker set-up time for individual collateralised reinsurance transactions, which will also be attractive for re/insurers that want to try out an ILS layer of coverage within their program.

Exchange Re follows the segregated cell company (SCC) structure, enabling segregated cells to be used to separate assets and liabilities associated with collateralised reinsurance transactions within the vehicle.

Now open for business, Exchange Re and USA Risk need to attract an ILS or collateralised reinsurance deal to Malta, as proving the concept within a new regulatory environment is important to demonstrate to the ILS asset class that the structure ‘works’ and Malta is open for ILS business.