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Trust Agreements

An agreement establishing a trust arrangement, which may be utilized as a mechanism by the reinsurer for purposes of securing its obligations to the ceding company to satisfy securitization requirements that might apply to the reinsurer under the terms of a reinsurance agreement. Under the trust arrangement, a legal entity is created by a grantor (usually the reinsurer) for the benefit of a designated beneficiary (usually the ceding company). The trustee (generally a financial institution) holds a fiduciary responsibility to handle the trust’s corpus assets and income for the economic benefit of the beneficiary, in accordance with the terms of the trust. In the event that the reinsurer defaults in its payment obligations to the ceding company under the terms of the reinsurance agreement, the trustee may release funds from the corpus of the trust to satisfy such obligations to the ceding company, in accordance with the terms of the trust. In reinsurance, such an agreement is typically established to permit a licensed ceding company to take credit for non-admitted reinsurance up to the value of the assets in the trust.

Trust deed

The legal document setting out the responsibilities of the trustees, i.e. holders of property, and the rights of the beneficiaries. In the case of unit trusts the trust deed concerns the trustees and the fund managers and lays down the framework within which managers must operate.

Trust fund

1. Type of employer’s funding instrument for retirement accounts and employee benefits. The other types are an insured plan or combination plan . 2. Separate account in the U.S. Treasury, mandated by Congress, whose assets may be used only for a specified purpose. For the supplementary medical insurance (SMI) trust fund, monies not withdrawn for current benefit payments and administrative expenses are invested in interest-bearing federal securities, as required by law; the interest earned is also deposited in the trust fund.

Trust policy

A policy that forms the property to be held in trust for the beneficiary. People whose capital is used in their business or profession often effect whole life insurances on trust under the Married Women’s Property Act 1882 for the protection of dependants putting the policy beyond the reach of creditors. A child’s deferred insurance could also be arranged in trust for a child under the same Act. See PARTNERSHIP INSURANCE.