ILS Funds in Guernsey

Guernsey has a thriving insurance linked securities (ILS) sector. As described in Carey Olsen's ILS briefing1, Guernsey is home to an abundance of ILS structures including:

  • Hundreds of special purpose insurers (SPIs) writing billions of dollars of life and general risks for ILS Funds and investors;
  • ILS funds, both private (often for a single, sophisticated investor) and blind pool managing billions of dollars of ILS assets; and
  • 'A' rated reinsurance companies established by large scale ILS managers writing billions of dollars of gross written premium annually.

Facilitating this success is a bespoke regulatory regime specifically designed for the ILS sector. Fast-track authorisation rules enable SPIs to be established and regulated with immediate effect. Those rules (SPI Rules) are designed to accommodate certain features peculiar to ILS transactions.

Funds pedigree

Guernsey is also home to a huge range of investment funds:

  • There are more than 800 Guernsey domiciled funds2.
  • £263 billion in total assets under management, including over £100 billion in private equity3.
  • 119 London listed entities with £46 billion in capitalisation4.

Carey Olsen advises over 70% of all Guernsey funds, the 10 largest promoters of Guernsey domiciled investment funds by assets5 and nine of the world's top 10 private equity firms6.

A number of European ILS managers raise and deploy capital using a UCITS fund (an EU Undertaking for the Collective Investment of Transferable Securities). A UCITS is an open-ended fund, offering liquidity to investors through the right to redeem their interest upon notice (often monthly or quarterly). UCITS are heavily regulated by the EU. The upside of the burden of this regulation is market access – UCITS can be distributed to any investor throughout Europe (even retail).

Guernsey also offers a variety of categories of open-ended funds – Class A schemes aimed at retail investors to Class Q aimed at sophisticated and professional investors and a range of other types of open-ended fund in between. The extent of regulation varies depending upon the type of investor. Schemes offered to professional or sophisticated investors are subject to few investment strategy restrictions or diversification requirements provided adequate disclosure is made in the offering documentation.


The assets underlying an ILS fund (other than catastrophe bonds) can often be fairly illiquid. This is particularly true in the case of life ILS transactions which tend to endure for a longer period of time than general insurance ILS. Structuring a fund as open-ended does not in itself provide liquidity for investors. As the credit crunch showed, offering redemption rights to investors based on liquidation of the underlying assets can be problematic. A number of well-known open-ended property funds had to suspend redemptions in 2008 and following the Brexit vote due to a lack of liquidity of the underlying assets.

Whether open or closed-ended, the listing of the shares in the fund on an actively traded stock market, such as the London Stock Exchange (LSE), is an alternative way to provide liquidity to existing investors without relying on prompt liquidation of underlying assets. A listing enables existing investors to realise their investment through secondary sales to prospective new investors on the exchange.

Guernsey funds have enjoyed a close relationship with the LSE for decades and Guernsey companies have listed their shares on a number of other leading stock exchanges throughout the world such as NYSE, NASDAQ, ASX, TSX.

Guernsey also remains the home for more non-UK LSE listed entities listed than any other jurisdiction in the world. At the end of Q1 2018 there were 90 Guernsey 'financial' entities listed on the LSE main market - 12.69% of the total number of financial entities, making Guernsey the market leader for fund listings on the exchange outside of the UK7. Globally, Carey Olsen advises 101 LSE listed clients – more than double the number of the next nearest offshore law firm8.

Global distribution

In addition, The International Stock Exchange (TISE), which is headquartered in Guernsey, hosts both ILS vehicles and ILS funds. TISE was the chosen exchange for the world's first listed private cat bond transaction and the first securitisation of TAKAFUL (Sharia compliant) insurance policies.

TISE is recognised by the UK's acts authority, HMRC, the German regulator Bafin as well as other authorities globally.

Although Guernsey is outside of the EU, its funds are able to be distributed to a variety of investors in a large number of countries throughout Europe, the Americas, Asia and the Middle East. Guernsey funds are currently promoted or sponsored in more than 55 jurisdictions throughout the world.

Reputation for innovation

Guernsey likes to innovate. It was the first jurisdiction to establish legislation permitting the formation of protected cell companies in 1997. Since then it has also introduced the incorporated cell company and the SPI Rules. More recently, industry has been considering the possibility of the establishment of entities which combine insurance and investment activity in one vehicle. Although at an early stage, this could present significant efficiencies for ILS fund managers.

An international partner

Guernsey also continues to lead the way in international compliance matters. Guernsey adheres to the highest standards of international tax and regulatory principles and is committed to ensuring that this continues.

Guernsey has given its full support for the transparency principles central to the current G20, Organisation for Economic Co-operation and Development (OECD) and EU tax initiatives and is working as part of the wider international community in the development and effective implementation of internationally agreed standards, including those set by the Financial Action Task Force (FATF) and the OECD.

Guernsey has been assessed as being amongst the best quality financial centres in the world when measured against the rigorous international standards for tackling money laundering and terrorist financing set by the FATF.

Guernsey also participates fully in numerous international initiatives such as the OECD's base erosion and profit shifting project and developing the global Common Reporting Standard and the automatic exchange of information between tax authorities.

Christopher has significant experience in investment funds, insurance and reinsurance and protected and incorporated cell companies. He has built a strong reputation in private equity, having advised some of the world's largest private equity houses as well as new fund promoters in connection with fund establishment, investment structuring, exits and regulatory issues. He has also advised the insurance and reinsurance sector for almost 25 years and is recognised in the Guide to the World's Leading Insurance and Reinsurance Lawyers.

Carey Olsen is a leading offshore law firm. We advise on Bermuda, British Virgin Islands, Cayman Islands, Guernsey and Jersey law across a global network of nine international offices. We are a full service law firm working across banking and finance, corporate and M&A, investment funds and private equity, trusts and private wealth, dispute resolution, insolvency and property law. Our clients include global financial institutions, investment funds, private equity houses, multinational corporations, public organisations, sovereign wealth funds, high net worth individuals, family offices, directors, trustees and private clients. We also work alongside the major onshore law firms, accountancy firms and insolvency practitioners. For more information, please visit

2 Guernsey Financial Services Commission – Q1 2018 investment fund statistics
3 Ibid
4 London Stock Exchange – companies and securities data, 2018
5 Monterey Insight's 2017 Guernsey Fund Report – by assets
6 Private Equity International's 2018 PEI 300
7 London Stock Exchange – companies and securities data, 2018
8 Corporate Advisers Rankings Guide, May 2018