In May this year, it was brought to my attention that I have been
solely focused on discussing reinsurance trusts around the industry
for 20 years. Not quite dating back to the rotary phone, but long
before the advent of FaceTime.
Reinsurance trusts are used as a way to collateralise reinsurance,
insurance-linked securities (ILS), and many other types of insurance
programmes. The idea is to place cash or cash equivalents into an account
that, when structured properly, acts as a bankruptcy-proof financial
guarantee for said insurance programmes.
Much has changed in the world of reinsurance trusts over the past
20 years. Services levels, asset rates of return, and repercussions from the
2008 financial crisis have all shaped the reinsurance trust environment
we have today.
In many ways, trustees learned a lot from some of the difficulties
experienced. Understanding and learning from the past is key to success
in the future. The alternative is failure. As philosopher George Santayana
said, “Those who cannot remember the past are condemned to repeat it.”
With this in mind, I’d like to share some experiences from trustees
over the past two decades to help our industry continue to succeed.
One issue that many trustees have struggled with over the years is the
level of service and responsiveness they offer their clients. The reasons
can be many, but one of the main factors that I’ve observed on this front
was that some banks reorganised away from an approach that I would
call “client/relationship manager” to “client/trustee responsibility silos”.
For example, in my early days—using the client/relationship
manager model—a relationship manager would bring in a trust, review
the documents, collect the onboarding information, establish the
account, negotiate and circulate the trust agreement, and receive
the incoming funds.
The trust was considered funded and the work done. At that point,
the client was free to call either the relationship manager or his/her
designated assistant for any and all of their needs (account statement,
This approach has changed at a number of trustees. Now, many
are employing the client/trustee responsibility silo model. This means
that different teams—silos—all work on the same transaction, but not
necessarily working together. For instance, you might have a document
review team that deals with the trust agreement, a “know your customer”
(KYC) team that collects the onboarding information, and the account
servicing team that takes in wires or helps with online reporting.
It is hard to list all the issues a service setup like this can cause.
At a minimum, the client would need to sort out whom to call from
one of three teams to resolve issues—a confusing and frustrating client
experience that leads to delays, and that is a recipe for failure.
The Wilmington Trust Insurance Collateral Solutions (ICS) team
employs a system of client/relationship manager, and we avoid client/
trustee responsibility silos. We have set up our team the way we know
works: given Wilmington Trust’s ability to be nimble and our reputation
in the corporate trust space, we are able to operate in a way that makes
the most sense for our clients.
As reinsurance and ILS have become more sophisticated, so have some
of the collateral solutions they rely on. Robert Quinn of Wilmington Trust
reflects on the evolution of these industries.