As the global insurance-linked securities (ILS) market evolves and expands, so too do its operational complexities and counterparty risks. This evolution elevates the trustee from a mere administrator to an essential partner, providing the stability and confidence that allows market participants to thrive in an increasingly demanding landscape, HSBC Bank explains.
The Insurance-Linked Securities (ILS) market is experiencing significant growth, necessitating proactive and credible trustee solutions that encompass a comprehensive array of services offered through a single channel.
It is said that insurers never cede risks completely. Trustees, hence, play a crucial role in instilling confidence among insurers and participants by delivering value, thereby enabling them to concentrate on their core activities.
Whether for Collateralized Reinsurance Trusts, Catastrophe Bonds, or bespoke structures, trustees must prioritize key areas such as premium service delivery, global product offerings, asset safety and access to an array of treasury and liquidity tools offered with user-friendly technical capabilities to deliver the most value.
Experienced Team
To effectively manage large portfolios and high transaction volumes, trustees must possess a skilled and communicative team dedicated to each deal throughout its lifecycle. Clients benefit from having a single point of contact with specialized knowledge and operational expertise, ensuring smooth settlement and ongoing administration.
Efficient onboarding processes, including clear and timely Know Your Customer (KYC) procedures and account setup, are essential for building confidence in settlement execution. Coordination with underwriters and awareness of funding timing constraints are also critical components for a seamless closing.
An effective client servicing team also runs regular service reviews which offer clients an opportunity to review performance and also provide feedback offering either party the opportunity to continuously improve the servicing model.
Global Product Offering
The ILS market’s expansion is global especially as PE backed reinsurers now seek access to emerging markets both for cedants and for higher yield, requiring trustees with a presence in key markets. A comprehensive product offering—including trustee, collateral agent, custody, escrow services, asset servicing, and investment options—is vital.
Increasing allocation by reinsurers to private and alternative assets also create the inherent need for trustees to be able to perfect security or pledge over them which may not be very easy to achieve especially in emerging markets.
Trustees must adeptly navigate local regulatory developments and unique nuances in emerging markets and provide multi-currency solutions to optimize collateral use. Advanced liquidity and cash management tools, coupled with bespoke investment strategies, help balance capital protection with yield.
Asset Safety
In asset intensive reinsurance models, insurers help transfer the insurance risk to reinsurers but they take on credit and counterparty risk. Ensuring asset safety is paramount for making ILS a secure and attractive investment. This begins with the Trustee institution’s credit rating and extends to money market platforms and fund relationships.
Trustees must possess specialized knowledge and remain responsive to market developments, promptly addressing investment guidelines. A robust custody network supporting IBRD/EBRD settlements adds further resilience.
Technical Ease and Reporting Transparency
Trustees must offer reliable service and accessible technology for account activity and reporting. Clients expect timely access to accurate reporting and technical ease for trade execution. Some of the Trustees’ available reporting options are File Transfer Protocol (FTP), SWIFT statement messaging, Application Programming Interfaces (API), and a real time user-friendly online portal. These reporting tools are helpful for clients to reconcile, make decisions, and prepare financial reports effectively.
HSBC’s Successful Service Model
HSBC has developed a robust service model supporting the global ILS market. With deep regulatory understanding and transaction expertise, HSBC offers integrated services across trusteeship, custody, agency, treasury, foreign exchange, and liquidity management. A single point of contact ensures accountability, backed by resources from a global organization.
With a presence in over 70 countries, HSBC assists clients in expanding into markets such as Hong Kong and Singapore. Local teams provide regulatory insight and regional expertise. A broad range of investment options is available, including money market funds and investment trading services. The global securities platform includes over USD 7.8 trillion in assets under custody and USD 3.4 trillion under administration. Specialist ILS teams are based in the US, Bermuda, London, and APAC, with multi-currency and FX hedging capabilities supporting efficient collateral deployment.
Looking Ahead
Trustees are well-positioned to add value and drive business forward by alleviating clients from operational burdens.
As the ILS market expands into new asset classes and countries, managing new issuance and ongoing portfolio maintenance will become more demanding. Focused service delivery allows market participants to concentrate on primary objectives.
As one of the world’s strongest banks, HSBC is committed to helping clients mitigate risk and seize opportunities—today and into the future. Our secure infrastructure, innovative technology, and trusted service model provide the foundation for growth in a dynamic ILS landscape.
Contacts, to learn more:
| Garyfalia Leledaki, Business Development, Issuer Services EMEA, Corporate & Institutional Banking | HSBC Bank plc, [email protected] +44 7468 706 021 |
Sahil Trivedi, Business Development, Issuer Services Americas, Corporate & Institutional Banking | HSBC Bank USA, N.A, [email protected] +1 (934) 386-0981 |
This article was contributed by our partner, HSBC Bank USA, N.A.
