XL Group gives thumbs up to collateral trusts
XL Group is now accepting collateral trusts in leiu of letters of credit (LoCs) as collateral for corporate deductible and captive insurance programmes in the UK.
LoCs, which are traditionally used as collateral for corporate deductible and captive insurance programmes, can be expensive to maintain and time-consuming to administer. They are also treated as contingent liabilities on a customer’s balance sheet. Collateral trusts hold cash and are considered to be bankruptcy proof, according to XL Group. The trusts are quick to establish, inexpensive to maintain and do not need to be renewed each year. Assets in a trust can also remain on the balance sheet of a depositor, which means that using a trust instead of an LoC could help customers to free up otherwise encumbered credit lines, according to XL Group. Wells Fargo Bank is the preferred provider of this service. James Martin, the client and distribution leader at XL Group, said: “We are delighted to be working with Wells Fargo to offer this additional service to our customers.” “In today’s economic climate, LoCs are proving more costly to businesses both in management fees and as they tie up otherwise useful capital. Offering the collateral trust solution to our clients provides a valuable alternative.” Robert Quinn, the senior vice president of collateral trust services at Wells Fargo Bank, added: “Offering an alternative to insurance related LOCs that will save money, unencumber credit lines, and reduce workload clearly demonstrates XL Group’s commitment to their clients. Wells Fargo is pleased to serve as the preferred trustee.”