Internation law firm Walkers has formed a specialist Insurance Linked Securities group. The launch of the group in the Cayman Islands and Dublin brings together professionals in both offices with expertise in alternative risk transfer arrangements such as catastrophe bonds, reinsurance sidecars and securitisation vehicles.
Walkers’ ILS group advises clients on the legal and practical aspects of trading, financing and securitising risk involving Cayman Islands and Irish entities, including cash and synthetic catastrophe bonds, captive insurers, sidecars and life settlement transactions.
“As the highly specialised market for Cat bonds has grown dramatically over the past decade – and is further expected to double over the next two or three years – the Cayman Islands and Ireland have emerged as the jurisdictions of choice for Cat bond issuing vehicles,” said Garry Ferguson, partner in Walkers’ Dublin office.
“At Walkers we understand the volatile nature of the insurance industry and our team is dedicated to helping our clients receive the best return on their risk through the provision of quality, commercially rooted advice.”
Covering catastrophic risk
Philip Paschalides, partner with Walkers, based in the firm’s Cayman Islands office believes that as a result of limited capacity in the insurance and reinsurance industry and due to regulatory changes governing capital requirements in the form of Solvency II, insurers are attracted to alternative channels to raise capital to cover catastrophic risk.
“With strong investor appetite we anticipate continued growth in this sector, particularly with the recent enhancements to the Insurance Law in the Cayman Islands, which introduced a new licensing category for Cat bond issuers.”
Ratings agency Moody’s recently gave a similar assessment of the market. Moody’s commented on the issuance of $150m of earthquake risk by the California Earthquake Authority through its Embarcadero Re Ltd special purpose reinsurer, saying that the deal comes at a time when traditional reinsurers are potentially withdrawing capital and investors are more willing to make bets on catastrophe risks.
“Given investor demand, we could see a wave of catastrophe bond issuance in the wake of another major catastrophe and capacity shortages in the reinsurance market, which we expect to temper reinsurers’ ability to raise prices,” Moody’s said.
Dublin partner
Walkers’ ILS group also includes Dublin-based partner Anthony Smyth, who specialises in tax, as well as a number of other specialist attorneys from Dublin and the Cayman Islands.
“Walkers’ attorneys have experience of working on the vast majority of the Cat bond transactions effected in Ireland to date and our specialist Dublin-based taxation team builds efficient Irish tax structures based on a wealth of cross-border experience in the capital markets and structured products space,” said Mr. Smyth.
Additionally, Walkers has appointed Derek Stenson, who joins the firm’s Cayman Islands office as an associate in the ILS Group and specialises in capital markets transactions with a focus on insurance linked securitisations.
In a statement, the law firm noted that the ILS group will also be able to assist clients with the licensing aspects of risk transfer transactions, with support from the Walker’s Regulatory team, who have close working relationships with the Insurance Supervision Division of the Cayman Islands Monetary Authority and the Central Bank of Ireland.
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