Zurich Financial Services Ltd. has launched a product that claims to be a new alternative to letters of credit (L/Cs) for the UK's captive insurance companies.

Fronting insurance companies such as Zurich have traditionally asked for L/Cs as a form of collateral to secure their credit exposure with captive insurance companies and their parent companies.

Portfolio control

With the new product, known as eZ Trust, the captive insurer essentially hands over control of part its investment portfolio to Zurich.

Clients prepared to forgo control over part of their portfolio will no longer need to raise L/Cs for collateral purposes.

Collateral purposes

Essentially, the fund itself will act as collateral for captive insurance companies for which Zurich is the fronting insurer.

A captive insurance company is an insurer that primarily insures the risks of businesses that are related to it through common ownership.

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