Why Letters of Credit Still Anchor Captive Insurance Collateral

Letters of credit remain the most widely accepted form of collateral in captive insurance programs, serving as the foundation for fronting arrangements and regulatory confidence. In this podcast episode, Martin Ellis of Comerica Bank explains how letters of credit are issued, how draws are processed, and why evergreen and irrevocable provisions are essential to maintaining uninterrupted collateral protection for unpaid claims.

The conversation also covers how letters of credit compare with trust accounts and cash collateral in terms of cost, liquidity, and investment constraints. Group captive structures using back-to-back letters of credit are explored, along with how evolving bank regulations could influence future pricing and collateral requirements. Together, the discussion offers a practical view of why letters of credit remain central to captive program design.

Hear the full conversation on Captive.com to learn how letters of credit can enhance collateral efficiency and support a more resilient captive program.