Assets that are provided as security to ensure satisfaction of a future liability.
Often required by ceding companies to minimize their credit risk or offset
a nonadmitted balance. A direct writing captive writing deductible reimbursement
coverage may provide collateral to the insurance company that has issued a deductible
policy to the captive's insureds. The most common form of collateral posted
by captives or captive insureds or captive shareholders is the bank letter of
credit (LOC), but insurance trust funds may be used. See also
Letter of credit;
Regulation 114 Trust.
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