Karson Management (Bermuda) Ltd. has announced the launch of the Karson Collateral Program and completion of a ground-breaking $825 million collateral transaction for ING Insurance.

The company formed a specialist alternative collateral provider, Karson Capital Ltd., to provide collateral for international re/insurance companies, Lloyd's corporate members and other corporations to support their current and future regulatory and credit security requirements. To conclude its first transaction, Karson Management teamed up with ING Bank to arrange eligible Regulation XXX collateral for a large block of life insurance business ceded by Security Life of Denver Insurance Company to Security Life of Denver International Limited through a wholly-owned special purpose subsidiary of Karson Capital.

"The Karson collateral service will provide the global insurance markets with an efficient, scalable, and price-competitive source of short and long term collateral that will compete favourably with conventional alternatives, where supply and pricing have been all over the map," said Derrell Hendrix, CEO of Karson Management.

"It will also avoid the inadvertent investment risks and breathtaking complexity that characterised previous securitisation efforts in the US life market. What we have built is simple, secure and standardised, while meeting the high quality security required by clients and the eligibility requirements of regulators."

The form of collateral issued is a new and innovative financial guarantee through fully-secured demand notes, which have been designed to enable the ceding company to take credit for reinsurance or solvency relief under US insurance laws and UK insurance regulations.

The collateral provided will function as a practical alternative to LOCs and individually funded trusts and will be fully backed by a portfolio of high quality assets. The Karson Collateral Program uses intellectual property licensed from The RISConsulting Group LLC of Boston, Massachusetts and is administered by BNY Mellon providing collateral management, corporate trust and custody services.

Stephen Lawrence, a principal in Karson Management, said: "The successful launch of the program was considerably aided by BNY Mellon in providing securities services and ING Bank (London Branch), whose insurance market expertise was invaluable in bringing such an innovative program to fruition."

Karson is currently working on several follow-through transactions with ING Insurance and ING Bank (for other clients), as well as a number of third-party insurers and bank and non-bank capacity providers.

Richard Black, managing director of Karson Capital in Bermuda, said: "In addition to the life sector, we see opportunities in both the P&C reinsurance and the ILS markets. Our flexible platform can provide new and efficient sources of collateral to the market when traditional capacity is unavailable or uneconomic, or does not allow investment flexibility. We are expanding our marketing team and look forward to building a dialogue with all sectors of the industry."

Karson Management (Bermuda), founded by Derrell Hendrix and Stephen Lawrence in 2007 with funding from private individuals, is a structuring and management firm providing capital management and financial risk management solutions for key industries.

Karson's core activities include alternative collateral for international re/insurance companies and other corporations, bank capital enhancement solutions, and risk transfer solutions relating to insurance and reinsurance risk, operating performance and cash flow risk, and equipment residual value/decommissioning risk.