Icap and JLT partnering in insurance derivatives

London-based interdealer broker Icap and insurance group Jardine Lloyd Thompson (JLT) are to form a joint venture to trade derivatives based on insurance risk.

The market for insurance risk is currently illiquid and limited mostly to private investors. Dominic Burke, JLT's chief executive, pointed to an increase in the use and the variety of structures investors have used to commit capital to insurance markets over the past two years. And Icap chief executive Michael Spencer said: “I anticipate that derivatives and securities based on insurance risks will be one of the principal new growth markets of tomorrow.”

Citing the emergence of derivatives in credit, energy and freight, he added: “We believe insurance is next, as there is a clear opportunity for improved efficiency in risk transfer, liquidity, transparency and market access.”

The joint venture will be owned equally by the two firms and will broker, originate and structure insurance-related transactions.