The Office of General Counsel issued the following opinion on July 21, 2005 representing the position of the New York State Insurance Department.

Re: Regulation 114 - Proposed Master Trust

Question Presented:

Is the proposed "Master Trust Agreement" acceptable to the Department under N.Y. Comp. Codes. R. & Regs. tit. 11, § 126 ("Regulation 114") ?


No, the proposed Master Trust Arrangement would not be viewed by the Department as acceptable under Regulation 114.


A representative of the Bank of New York submitted to the Department a proposal involving the use of a master trust agreement and participation agreements as a means of using a single trust vehicle to create a qualifying credit for reinsurance trust executed by a single grantor reinsurer that would have several cedant beneficiaries. These beneficiaries would not sign the master trust agreement, but would agree, by signing a participation agreement, to be party to the terms of the master trust agreement and thus be eligible to obtain benefits thereunder.

Under the proposal, the assets contributed to the trust by the grantor would be accounted for by the trustee as separate subaccounts for each beneficiary, but the trustee would pool the trust’s assets for investment purposes.


N.Y. Comp. Codes R. & Regs. tit. 11, § 126 (2000) ("Regulation 114") sets forth the Department’s requirements for trusts that are to be used by insurance companies, particularly those used in connection with reinsurance agreements. The representative contends that the proposed arrangement conforms to these requirements. However, even if the operative provisions of the trust agreement, were it a stand alone agreement governing a single grantor, trustee and beneficiary, satisfied the requirements of Regulation 114, the structure of the proposed arrangement is such that it cannot qualify.

As a general matter, Regulation 114 does not contemplate the use of multiple beneficiary trusts. First, an examination of the text of Regulation 114 shows that all references to "beneficiary" and "grantor" are in the singular. Second, the definitions contained in the regulation clearly envision only the use of trusts that have a single grantor and a single beneficiary. N.Y. Comp. Codes R. & Regs. tit. 11, § 126.2 provides, in pertinent part, as follows:

(a) Beneficiary means the entity for whose sole benefit the trust has been established.

* * * *

(b) Grantor means the entity that has established a trust for the sole benefit of the beneficiary. When established in conjunction with a reinsurance agreement, the grantor is the unlicensed, unaccredited reinsurer.

N.Y. Comp. Codes R. & Regs. tit. 11, § 126.2 (2000).

Of additional relevance in this regard is N.Y. Comp. Codes R. & Regs. tit. 11, § 126.3(e), which explicitly provides as follows:

(e) The trust agreement must be established for the sole use and benefit of the beneficiary.

N.Y. Comp. Codes R. & Regs. tit. 11, § 126.3(e) (2000).

Furthermore, the Department interprets Regulation 114 as mandating that no trust agreement can be subject to conditions extraneous to the agreement and that an agreement may not reference other documents or agreements. Specifically, N.Y. Comp. Codes R. & Regs. tit. 11, § 126.3(d) provides as follows:

(3) the trust agreement must indicate that it is not subject to any conditions or qualifications outside of the trust agreement;

(4) the trust agreement cannot contain references to any other agreements or documents; …

N.Y. Comp. Codes R. & Regs. tit. 11, § 126.3(d) (3) & (4) (2000).

The proposed arrangement would result in a Trust that has more than one beneficiary (requiring the use of participation agreements to augment the trust agreement by making the trust's terms applicable to several ceding company beneficiaries). In addition, the master trust agreement itself explicitly references the participation agreements. Both of these are prohibited by Regulation 114.

In view of the above, the proposed Master Trust Arrangement would not be viewed by the Department as acceptable under Regulation 114.

For further information you may contact Supervising Attorney Michael Campanelli at the New York City office.