Many reinsurance agreements require that the reinsurer provide security for the reinsurance obligations arising from the reinsurance transaction. There are many ways security may be provided. One method is establishing a trust account to hold collateral backing up the reinsurance obligation. Where the collateral is held, how it is used and who manages the collateral in the trust account is critical to maintaining viable security for the reinsurance obligations.

In a case brought in New York federal court, a cedent in a coinsurance treaty with an off-shore reinsurer, found itself without the security that it thought it contracted for.

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