The banking report—an overview
SERIOUS SUPPORT
The cornerstone of any good business is often a solid and reciprocal relationship with its bank. And that is very much true in the world of insurance and reinsurance. Intelligent Insurer spoke to more than 20 experts from the banking, insurance and reinsurance industries to investigate the myriad of ways in which banks support insurers and reinsurers in their operations.
G iven that the businesses of insurance and reinsurance are
dependent on the constant fl ow of and availability of money, it is not surprising that the banking industry plays a central and
critical role in supporting these industries. Banks come in many shapes and sizes, but all have the ability to provide
essential services to insurers and reinsurers that allow them to remain competitive, effi cient and solvent.
Some provide purely corporate banking services, which include payment management services. While many types of businesses use this service, in the case of insurers, the need for this service to be provided effectively and securely is even more critical, argues Steven McEwan, of counsel in Hogan Lovells’ corporate and regulatory insurance team.
“It is crucial for insurers to be able to pay claims to their customers
and to receive premiums from those customers,” he says. “Having a fl uent mechanism for the receipt and payment of funds is crucial for the operation of the insurance industry.”
Similarly, while custody services are also used by a variety of industries, they are the cornerstone of the operations of insurers and reinsurers.
“Insurers and reinsurers have to hold assets to back their liabilities. It
is essential for those assets to be held in a safe way and generally with a custodian,” says McEwan. “An insurer or reinsurer has to be absolutely confi dent that the custodian is not going to become insolvent, leaving it unable to access
its assets.” Banks can also provide support through services such as letters of credit
and trusts that allow insurers and reinsurers to post collateral for their obligations in jurisdictions or for counterparties which require it. They also provide loans to enable insurers and reinsurers to meet liquidity and working capital requirements.
And then there is the advice banks can give with regard to transactions
such as capital-raising and mergers and acquisitions. “Investment banks have a very close understanding of the needs
of insurers and reinsurers, because they are themselves regulated by a similar regime,” says McEwan. “Investment banks also have dedicated individuals who spend their time understanding the insurance industry and so can provide a specialist advisory function.”
24 | INTELLIGENT INSURER | September 2011
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