Collateral Trust Sample Clauses
A Collateral Trust clause establishes that certain assets or securities are held by a trustee as collateral to secure the obligations of a borrower or another party. In practice, this means that the borrower transfers ownership or control of specified assets to a trustee, who holds them for the benefit of the lender or beneficiaries until the underlying obligations are fulfilled. For example, a company might place shares or bonds in a trust to guarantee repayment of a loan. The core function of this clause is to provide additional security to the lender, reducing credit risk by ensuring that valuable assets are available to satisfy obligations if the borrower defaults.
Collateral Trust. (a) Within thirty (30) days following the Closing Date, the Reinsurer shall establish a collateral trust account (the “Collateral Trust Account”) with a third party trustee for the benefit of the Ceding Company pursuant to the terms of a reinsurance trust agreement substantially in the form of Exhibit D (the “Collateral Trust Agreement”), with such changes thereto as may be mutually agreed by the Parties. The Reinsurer shall maintain the Collateral Trust Account with Collateral Trust Authorized Investments having an aggregate Fair Market Value no less than the Collateral Trust Required Balance. The Collateral Trust Required Balance shall be adjusted as of the end of each Accounting Period. The Collateral Trust Authorized Investments shall be valued according to their current Fair Market Value.
(b) Notwithstanding any other provision of this Agreement, the Ceding Company or any successor by operation of law, including any liquidator, rehabilitator, receiver or conservator of the Ceding Company may draw upon the assets held in the Collateral Trust Account at any time, without diminution because of the insolvency of any Party only for the following purposes: (i) to reimburse the Ceding Company for the Reinsurer’s share of premiums returned to the owners of the Covered Insurance Policies on account of cancellation of such policies; (ii) to reimburse the Ceding Company for the Reinsurer’s share of surrenders and benefits or losses paid by the Ceding Company pursuant to the provisions of the Covered Insurance Policies; (iii) to pay any other amount that the Ceding Company claims is due under this Agreement; or (iv) in the event that the Ceding Company receives notice of termination of the Collateral Trust Agreement, to fund an account with the Ceding Company in an amount at least equal to the Collateral Trust Required Balance. In the event that any amount drawn by the Ceding Company is subsequently determined not to be due, the Ceding Company shall promptly return to the Reinsurer the excess amounts so drawn and, until such excess amounts are returned to the Reinsurer, such amounts, together with interest thereon accrued at the Interest Rate (or the Alternative Rate, if applicable), shall be held by the Ceding Company in trust for the complete and sole benefit of the Reinsurer and the Reinsurer shall be entitled to all rights, title and interest in said amounts.
(c) If as of the end of any Accounting Period the Fair Market Value of Collateral Trust Authorized In...
Collateral Trust