London
20 January 2016
Reporter: Stephanie Palmer
BNY Mellon supports Canadian collateral financing first
Karson has completed the first K-Note reinsurance collateral financing transaction in Canada, supported by BNY Mellon.

Developed by Karson, K-Notes are a marketable security that requires the issuer to pay the face value amount plus interest upon maturity, or if demanded earlier.

They were developed to meet US insurance regulation criteria, but also present an alternative to credit-for-reinsurance applications, traditional letters of credit and funded trust accounts. They can also be used as admitted assets, which can be held as capital on the books of a ceding insurance company.

The K-Note transaction platform is supported by BNY Mellon’s corporate trust, custody and collateral management services, and is designed to be scalable and efficient. BNY Mellon’s London team was selected to support the Canadian transaction in 2009, and the bank also provides access to wider capital markets to provide financing capacity.

The Canadian transaction involved the issuance and deposit of a K-Note in to a reinsurance security arrangement account, which was established in accordance with the Canadian Office of the Superintendent of Financial Institutions.

It is backed by a payment obligation of a third party financial institution and a portfolio of investment assets.

Derrell Hendrix, CEO of Karson, said: “We are pleased to have concluded this first of what we hope to be many Canadian reserve financing transactions based on clear guidance from the Canadian regulator.”

“The Karson programme has again successfully transformed its access to market capacity into the issuance of an instrument, a K-Note, that satisfied our client’s reinsurance collateral financing need. We have been able to meet a very challenging client requirement while continuing to develop a scalable and sustainable execution platform with our partners at BNY Mellon.”

Dean Fletcher, head of corporate trust for Europe, the Middle East and Africa at BNY Mellon, said: “With the influx of new regulations there is a continual need to scrutinise effective ways of meeting capital adequacy requirements.”

He added: “This is a landmark transaction and will provide a template for us to work with Karson to help their clients navigate the new regulatory landscape following the financial crisis.”

Karson has completed 16 K-Note transactions to date, raising $8.2 billion in reserve collateral and capital financing capacity on behalf of its clients.

More payments news
The latest news from Asset Servicing Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
ECB to launch new faster payments system
22 June 2017 | Frankfurt | Reporter: Stephanie Palmer
The European Central Bank (ECB) is expanding its TARGET 2 instant payments system to facilitate retail payments throughout Europe
New liquidity management solutions set to manage cross-border payments
15 June 2017 | New York | Reporter: Stephanie Palmer
J.P. Morgan has launched two new liquidity management solutions for cross-border payments
SIA to provide Icelandic payments update
13 April 2017 | Reykjavík | Reporter: Stephanie Palmer
The Central Bank of Iceland has selected technology infrastructure provider SIA to implement and support its new real-time gross settlement system and instant payment platform
PayCommerce hails successful instant payments test
31 January 2017 | Edison, New Jersey | Reporter: Stephanie Palmer
Cross-border payments network PayCommerce has completed the first payment, clearing and settlement using its Federated Ledger blockchain technology...
EBA and SIA launch instant payments testing
19 January 2017 | Milan | Reporter: Stephanie Palmer
Testing has gone live for EBA Clearing’s pan-European instant payment infrastructure, before its scheduled go-live date in November...
SWIFT tests blockchain for cross-border payments
12 January 2017 | La Hulpe | Reporter: Mark Dugdale
SWIFT is exploring whether banks can use distributed ledger technology to improve the reconciliation of their nostro databases in real time to optimise their liquidity globally...
HSBC helps work towards cash-free India
29 November 2016 | Pune, India | Reporter: Stephanie Palmer
HSBC India has launched a new unified payments interface (UPI) solution for corporates in the country...
More payments news