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European first for Bank of Ireland securitisation executed in challenging credit conditions Back  
An example of the reaction of the Irish capital markets to the credit crisis was the innovative Bank of Ireland Value in Force Securitisation last October which was a regulatory capital transaction conducted within the parameters of boosting regulatory capital, while employing a securitisation to do so, and one in the complex area of life assurance, requiring the tailoring of the deal to regulatory requirements regarding the treatment of embedded life assurance value.
The winner of the FINANCE Capital Issues Deal of the Year was the Bank of Ireland Value in Force Securitisation, which was a highly innovative transaction and a first of its kind in both the Irish and European markets (being both a synthetic securitisation and a regulatory capital transaction).

The deal was a synthetic securitisation of the value in force of a dynamic portfolio of life insurance contracts held by New Ireland Assurance Company plc, a wholly owned subsidiary of Bank of Ireland. The purpose of the deal was to monetise the embedded value of the portfolio in order to qualify it as core tier 1 capital of the Bank of Ireland Group. The deal involved the issue of €400 million of Emergence Offset Notes by a Luxembourg SPV of which €380 million have the benefit of a guarantee by Ambac Assurance UK Limited. It delivered an increase of approximately €400 m in core Tier 1 capital for Bank of Ireland.
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Key challenges included structuring the deal so as to meet stringent Irish regulatory capital rules on the treatment of life insurance embedded value, particularly with regard to satisfying the Irish Financial Regulator that the deal delivered a permanent and loss absorbing source of capital to Bank of Ireland Group. Also, the deal had to be structured to ensure it did not impact on the regulatory or operating position of New Ireland Assurance Company plc, while also meeting the requirements of the monoline insurer, Ambac.

Commenting on the deal, Fergus Gillen, Partner, McCann FitzGerald said “This was a highly innovative transaction which allowed Bank of Ireland to unlock the embedded value of its life assurance business whilst at the same time raising Tier 1 capital. It was all the more impressive that the transaction was successfully completed in very challenging market conditions.”

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