BNY Mellon Corporate Trust has introduced an insurance trust product for the European market to help clients meet collateral requirements for insurance obligations.
Used by insurance and re-insurance companies, an insurance trust is an alternative to a letter of credit and allows companies to utilize the risk mitigation techniques allowed under ‘Solvency II’, the new regulatory requirements for insurance firms in the European Union.
BNY Mellon said the insurance trust product is a trust account established explicitly to meet collateral requirements for insurance obligations.
According to the BNY Mellon, the advantages of the insurance trust include: a structure which provides comfort for the ‘beneficiary’ that an insurer will fulfill their obligations and the separation of asset ownership assets which provides enhanced security for counterparty risk.
The trust also provides a framework which meets the requirements of Solvency II and other value-added services, including analytics, reporting and data management are available.
The European insurance trust gives insurers the ability to manage assets via an investment strategy and any income generated can then be directed back to the insurer.
BNY Mellon international Corporate Trust executive James Maitland said that with the extensive experience, stability and strong credit ratings, BNY Mellon play a key role in developing the insurance trust landscape in Europe and offering an alternative to letters of credit to the insurance industry.