Wells Fargo & Company (WFC) has announced the introduction in the UK of an insurance trust currently used by corporate insurance programmes that provides an alternative to letters of credit (L/Cs).

The Wells Fargo UK Insurance Trust can be used as collateral for UK- and EU-based corporate insurance programmes and will be available through WFC's Wells Fargo Bank subsidiary.

US model

According to WFC, the new trust product is an extension of a widely accepted version of the trusts that have been employed in the US market for years.

To date, the bank says this trust arrangement has replaced thousands of L/Cs for a range of insurance and reinsurance purposes.

Benefits

The diversified financial services company claims the insurance trusts provide a number of advantages over L/Cs, including significant cost savings.

The trusts are said to also increase credit availability for clients using it and eliminate the annual L/C renewal process, according to WFC.

Rather than posting L/Cs to cover their insurance collateral requirements, clients will now be able to place cash into a trust account in the amount of their collateral requirement.

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