Transfers of insurance linked bonds which meet certain conditions will be exempt from UK stamp duty from 17 May 2022. This will be particularly important for the insurance sector where these bonds are issued as part of transformation activities insurance risks.
The aim of the new exemption is to reduce the cost and complexity of ILS arrangements and to make the UK a more attractive jurisdiction for their location.
The exemption applies to ILS which are capital market investments issued under a capital market agreement by a “qualifying transformation vehicle” (i.e. an SPV of insurance which fulfills the conditions prescribed by the Risk Transformation (Tax) Regulations 2017). This means that the exemption only applies to ILS which are bonds and not stocks.
The exemption will not apply to ILS which carry a right of conversion into, or a right to acquire other securities, unless these securities are ILS which are issued by the same SPV and to which the exemption applies. would apply.
SPVs that fall within the exclusion of the UK corporation tax exemption under the Transformation of Risks (Taxes) Regulations 2017 will not be eligible for the stamp duty exemption.