Lottoland completes Gibraltar’s first €100m ILS transaction

International lottery broker Lottoland has completed an insurance-linked securities (ILS) transaction in Gibraltar, in order to insure itself against major customer wins. The €100m transaction was arranged by German investment business inea GmbH through the issuance vehicle Euroguard Insurance Company PCC.

The ILS allows investors to purchase portfolios of insurance policies in order to lessen risk by diversifying over a large number of policies and in different regions.

The transaction has been completed after Gibraltar introduced a framework for ILS last year, as part of a bid to make the jurisdiction a major hub for such transactions.

The ILS has a two-year term and offers investors an annual return of between 5 and 15 per cent, depending on the level of risk taken on by the investors, and has been fully subscribed by backers including a number of specialist funds.

“Our €100m ILS is a cost-effective way to reinsure against wins by our customers who can bet on an exciting range of mega-jackpot lotteries from around the world,” Lottoland managing director Nigel Birrell said.

“Gibraltar has not only set the standards for robust online gaming legislation in Europe, it is now primed to take the lead in the fledgling European ILS market through a progressive approach to financial services.”

Gibraltar’s chief minister Fabian Picardo said the traditional ILS market was a billion dollar industry in the US.

“[Our] sights are set firmly on making Gibraltar the first choice for ILS transactions within the European Union,” Picardo said. “Given the depressed outlook for interest rates, we believe that Lottoland’s pioneering use of our new legal and regulatory framework for ILS transactions will generate further interest from sponsors and investors in Europe.”

The government’s minister for financial services Albert Isola said he was delighted that Gibraltar had completed its first ILS transaction just over a year after introducing the framework.

“It is particularly gratifying that this transaction involves businesses from both of Gibraltar’s vibrant and growing insurance and gaming sectors,” Isola continued. “These are important sectors in our community providing valuable employment and other opportunities for our economy.”

“I would like to thank both Lottoland and inea GmbH for choosing to structure the transaction here and for their confidence in Gibraltar as the place to break new ground for the ILS sector within the European Union.”

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