Karson, BNY Mellon team up for Canada K-note

Karson Management (Bermuda) and BNY Mellon say they have completed Canada’s first K-Note reinsurance collateral financing transaction in Canada (a K-Note is a marketable security evidencing the obligation of the Issuer to pay periodic interest payments and its face amount at maturity or upon earlier demand).

This multi-million Canadian dollar transaction involved the issuance and deposit of a K-Note into a reinsurance security arrangement (RSA) account established in accordance with the requirements of the Canadian regulator, the Office of the Superintendent of Financial Institutions (OSFI). The K-Note is backed by a payment obligation of a third-party financial institution and a portfolio of investment assets.

Derrell Hendrix, CEO of Karson, said: “The Karson programme has again successfully transformed its access to market capacity into the issuance of an instrument, a K-Note, that satisfied our client’s reinsurance collateral financing need. We have been able to meet a very challenging client requirement while continuing to develop a scalable and sustainable execution platform with our partners at BNY Mellon.”

BNY Mellon is Karson’s service partner of choice and its London service team was appointed in 2009 for the forerunners to this new transaction. “With the influx of new regulations there is a continual need to scrutinise effective ways of meeting capital adequacy requirements,” said Dean Fletcher, head of Corporate Trust EMEA at BNY Mellon. “This is a landmark transaction and will provide a template for us to work with Karson to help their clients navigate the new regulatory landscape following the financial crisis.”

The K-Note was rated by both Standard & Poor’s and DBRS.