As the proud sponsor of the ILS section of Intelligent Insurer, Wells Fargo explains why the use of collateral is crucial, whatever the type of ILS deal.
Clearly the ILS space is growing, and growing rapidly. When analysing the various instruments, it is important to remember that posting collateral is very often part of the overall programme. One of the available options has clear advantages over the others. And one bank has options not offered by others. The Wells Fargo ILS trust, combined with the Wells Fargo cash deposit account, seems to be the ideal collateral solution in the ILS space.
The most efficient collateral mechanism
The trust concept is fairly straightforward. When posting collateral, you can either use a letter of credit (LOC) or establish a bankruptcy-proof trust account that is funded with cash or cash equivalents in the amount of the collateral required. The trust is advantageous for a few reasons.
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ILS, Wells Fargo, Intelligent Insurer