Effectiveness

Regulatory Approvals

The K-Note is becoming widely accepted as a qualifying form of collateral for several different insurance applications:

  • K-Note has received formal approvals from four U.S. State Insurance Departments indicating that the K-Note is eligible collateral for statutory reserve credit for reinsurance.
  • K-Note has received approvals from two U.S. State Insurance Departments indicating that the K-Note can be held as capital/an admitted asset.
  • K-Note was recently approved by the Office of the Superintendent of Financial Institutions in Canada (OSFI) to satisfy the collateral requirements of reinsurers that are not federally registered in Canada to post security in favor of their federally registered Canadian insurance company clients.

Established Sources of Capacity

Karson Collateral is expanding its network of committed capacity providers as an increasing number of banks and insurance/reinsurance companies indicate a keen interest in supporting additional / future collateral transactions.

Rating Agency Buy-in

The K-Note has been rated in relation to a number of executed Collateral Transactions:

  • rated A- or better by Standard & Poor’s (S&P) in relation to two closed transactions.
  • designated NAIC 1 by the Securities Valuation Office of the National Association of Insurance Commissioners (NAIC) in relation to regulatory capital filings.

These ratings imply that the K-Note issuance and support mechanics have been thoroughly vetted by both S&P and the NAIC and deemed satisfactory to achieving the high rating levels that have been achieved.

The ratings approach used by both S&P and the NAIC was based on the credit rating of the UPO provider that provided the liquidity obligation supporting the respective K-Note.

Executed Documentation

All client collateral transactions are executed via similar structures and over the same platform. As a result, Karson Collateral is able to offer a full suite of existing legal documentation that has been developed in conjunction with a number of concluded transactions. Using a standardized approach benefits clients by minimizing the impact on:

  • Client management resources
  • Legal review time and costs
  • Rating agencies
  • Regulatory review and acceptance

The Karson Collateral approach is to give clients and their legal counsel access to specimen versions of all existing documentation required to conclude a transaction. It is expected that clients and counsel will thoroughly review all specimen and definitive documentation in relation to the first transaction, but to a far lesser extent in relation to subsequent transactions.