LONDON, May 23, 2011 — BNY Mellon Corporate Trust announced today that it has brought to the market the first Europe – compliant insurance trust. Used by insurance and re-insurance companies, an insurance trust is an alternative to a letter of credit and allows companies to utilise the risk mitigation techniques allowed under "Solvency II", the new regulatory requirements for insurance firms in the European Union.
The insurance trust, a core BNY Mellon product, is a trust account established explicitly to meet collateral requirements for insurance obligations. It will now be offered to clients in the European insurance industry as a flexible, secure and cost-effective option to a letter of credit.
Advantages of the insurance trust include:
- A structure which provides comfort for the 'beneficiary' that an insurer will fulfill their obligations;
- The separation of asset ownership assets which provides enhanced security for counterparty risk;
- 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. Unlike a letter of credit which requires re-financing after a set time period it is an "evergreen" arrangement, which doesn't require renewal and continues in perpetuity
James Maitland, international Corporate Trust executive at BNY Mellon, said: "With our extensive experience, stability and strong credit ratings, we play a key role in developing the insurance trust landscape in Europe and offering an alternative to letters of credit to the insurance industry. We have been working closely with market participants to address their Solvency II requirements and believe this innovative product provides compelling cost and risk benefits to the market."
Michael Whelan, managing director, Corporate Trust, BNY Mellon, said: "BNY Mellon has always been at the forefront of innovation in the insurance industry to support our clients, helping them realise efficiencies and unlock potential."
BNY Mellon Corporate Trust services $11.9 trillion in outstanding debt from 61 locations in 20 countries. Its clients include governments and their agencies, multinational corporations, financial institutions and other entities that access the global debt capital markets. The corporate trust business utilizes its global footprint and expertise to deliver a full range of issuer and related investor services and to develop customized and market-driven solutions. Its range of core services includes debt trustee, paying agency, escrow and other fiduciary offerings.
Corporate trust providers are appointed by corporations, municipal governments and other entities issuing debt to perform a variety of duties, including servicing and maintaining the debt issue, processing principal and interest payments for investors, representing investors in defaults, and providing value-added services for complex debt structures.
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $25.5 trillion in assets under custody and administration and $1.2 trillion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available at www.bnymellon.com.
This press release is issued by The Bank of New York Mellon to members of the financial press and media do not constitute investment, legal, tax or other advice or a recommendation to enter into any transaction or an offer or an agreement, or a solicitation of an offer or an agreement, to enter into any transaction (including, without limitation, for the provision of any services). All information and figures source The Bank of New York Mellon as at 19 April 2011 unless otherwise stated. The Bank of New York Mellon, London Branch, registered in England and Wales with FC005522 and BR000818
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