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Guernsey Structure Employed In UK Mortgage Scheme

Thursday, January 12, 2012

Guernsey’s Protected Cell Company legislation will be used to create an insurance company which will underpin a new scheme being introduced in the United Kingdom to allow lenders to offer larger mortgages to home buyers.

The Guernsey office of the Jardine Lloyd Thompson Group is to play a key role in the new mortgage indemnity insurance scheme being introduced by the UK Home Builders' Federation (HBF) and the Council of Mortgage Lenders (CML), supported by the UK government.

The scheme will allow for greater credit to be offered to UK homebuyers, with mortgages under the scheme to be underwritten by house builders and the UK government. By insuring the risk of default losses, the scheme allows lenders to offer 95% loan to value (LTV) mortgages on new homes.

The JLT Group will manage and develop the scheme through a joint initiative of its operating companies, Lloyd and Partners Limited, JLT Specialty Limited and JLT Insurance Management (Guernsey) Limited, which will run a captive insurance company for HBF.

Nick Wild, Managing Director of JLT Insurance Management (Guernsey) Limited, said: “I am delighted that after more than two years of development work by JLT, this very substantial project is now to be implemented. Guernsey’s Protected Cell Company legislation will be used to create an insurance company which it is anticipated will operate with between 50 and 100 cells.”

Steven Rance, Partner of JLT, commented: “This risk management solution, created in response to the reduced availability of mortgage funding for homebuyers with small deposits, will reduce lender risk at higher LTV ratios and so allow lenders to offer 95% LTV mortgages for new home buyers at more competitive rates."

“The UK's major lenders and house builders are all supporting the scheme which is being backed by the government and is expected to launch in March. This is an extremely timely and exciting development for lenders, builders and the UK housing sector,” Rance added.

Before the launch, JLT will be developing the legal framework, scheme structure, insurance company and management information systems. Initially, the scheme is expected to run for three years.

Stewart Baseley, the Executive Chairman of the Home Builders Federation, said: “The lack of high loan-to-value mortgages has been a major constraint on new home sales for the last four years. The indemnity scheme should provide a significant boost to new home sales over the next three years. Everyone involved in the scheme is now working very hard to ensure customers and home builders gain maximum benefit. HBF is therefore pleased to have appointed JLT whose experience and expertise will be crucial to the scheme’s success.”

Dominic Burke, Group CEO of Jardine Lloyd Thompson Group, said: “This is an excellent example of JLT working with its clients and stakeholders to provide innovative solutions, in this instance not only addressing the needs of the client but also their end customers.”