Robert Quinn, senior vice president of Wells Fargo, tells Intelligent Insurer why collateralised deals are in higher demand than ever.
I can’t say that I have really been around the reinsurance ‘scene’ for all that long (going on 15 years), but in that time, I have never seen business exploding the way it is now—particularly in the area of collateralised deals. As a reinsurance and ILS trustee, we have seen a tremendous pick-up, not only in the amount of money in the space, but in the number of collateralised deals being done. I am, however, finding that many of these deals requiring collateral have one thing in common: cash seems to be the investment of choice.
Having been involved in the setting up and ongoing administration of well over 1,300 of these trusts, I can say one thing for sure: the key here is safety. My clients that use reinsurance trusts as their collateral mechanism, by and large, do not want to assume investment risk along with the insurance risk that they are undertaking. Therefore, the investments within a trust need to be safe, liquid, and predictable in value. Many tell me that the rate of return, especially in this low interest rate environment, is not critical to them.
When discussing safe investment options within a reinsurance trust at Wells Fargo, I always mention our Wells Fargo cash account. I do this for two reasons. One is that the cash account, as defined by the US Office of the Comptroller of the Currency (OCC) is bankruptcy-proof. The details of this statement are more involved but I am happy to go over it with those who would like to know more.
Robert Quinn, Wells Fargo, Intelligent Insurer, Rendez-Vous