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“We have an extremely streamlined (and highly
compliant) onboarding process that allows us to
obtain the information requested of the client and
have accounts open within two days.”
Rates of return on trust assets
There is one area where I have seen very little change, and for all
the right reasons. Assets held in trusts are typically cash (earning
interest), cash in AAA-rated US Treasury funds, or in actual shortterm
The reason is fairly simple, and I have heard it countless
times from industry partners: “I have enough insurance risk.
I don’t need investment risk as well.” Or, “I want to be able to sleep
Many reinsurers and ILS funds have ultra-conservative investment
guidelines written in their own prospectuses. A further reason that
they might take such a conservative approach is that many are
looking for investors. Having liberal investment criteria might be
off-putting to investors.
One thing I have seen lately is much larger overall interest in the
rate of return on even ultra-conservative trust investments. When I
started in the industry in 1999, US Treasury rates were just under 5
percent. Then, during the financial crisis, the rate of return was about
zero for money market funds and about 1 to 3 bps on treasuries.
This went on for years. During this period, there was really
nothing for the conservative depositors of these trust funds to do but
now, many money market funds are above 180 bps and US Treasuries
are similarly positioned. All good news. However, as of this writing,
the US Federal Reserve is talking about lowering rates again, pushing
everything down. The to-and-fro of rates continues.
These are just a few of important changes in the industry that come
to mind and are based on my various conversations about positive and
negative developments in the reinsurance and ILS trust space.
Our industry continues to evolve so we must evolve with it
to be successful and provide value to our clients. We should
remember what has come before, but not let the past keep us from
Robert Quinn is the vice president and business development manager
of insurance collateral solutions at Wilmington Trust. He can be
contacted at: email@example.com
The ICS team has received numerous awards and accolades
in its five years of operation. I attribute this to our approach. I
am deeply proud of our team, which many in the industry would
recognize: Todd Winchel, Robert Bilodeau, Mike Ramsey, Jose
Alcantara, Scott Wetzel, Katie Whitestone, Newmann Marlett, and
Client onboarding and KYC
This is a tough one for many trustees. Much of the change over the
past 20 years has been as a result of two factors: the USA Patriot Act
and the 2008 financial crisis. The Patriot Act created far more scrutiny
of most types of accounts at financial institutions—money laundering
and terrorism funding being two important issues. There was not much
wriggle room for a bank when dealing with the US government. Then
came the financial crisis.
This made things worse for banks, and wounds (financial and
reputational) were often self-inflicted due to careless mistakes. To
be clear, we are all subject to the same regulations and informationgathering
requirements, but here is where some banks fell down.
Within the world of corporate trusts, there are many services
offered with somewhat different KYC information requirements:
escrow, indenture trustee, asset-backed trustee, mortgage-backed
trustee, structured finance trustee, and so on.
Some banks (to protect themselves) created what I call a “master
KYC checklist” that was provided to all clients regardless of their
product needs. This list would cover all KYC requirements for all
products. Therefore, in the reinsurance trust world, when a client went
to one of these banks with a new deal, they were burdened with
a fairly large onboarding packet and questionnaire, often asking for
information that the client wasn’t in a position to provide (at least not
in a timely fashion).
Closer to our industry, a self-inflicted wound I heard about the most
was the trouble it was causing to reinsurers and ILS funds.
At Wilmington Trust, we seek to ask of the client only what is
absolutely needed so as not to burden clients with unnecessary work.
We have an extremely streamlined (and highly compliant) onboarding
process that allows us to obtain the information requested of the client
and have accounts open within two days.