NTUC begins shifting custody assets to Northern Trust

The Singaporean insurer has added Northern Trust to diversify counterparty risk from its continuing provider, Citi.

Insurance company NTUC Income has begun transferring custody of some assets from Citi to Northern Trust.

The S$23 billion ($17.6 billion) firm recently appointed Northern Trust as a second custodian to diversify its exposure. The review began at the beginning of the year in reaction to the global financial crisis and the US government bail-out of Citi.

Jonathan Chai, director of investment operations, says the initial plan was to transfer investment-linked product custody to Northern Trust. This proved unworkable, however, because these assets in themselves are expensive to administer. Moreover, Northern Trust was new to this business line in Asia.

Therefore NTUC opted to send a bundled package of assets to the new provider centred around assets in its general insurance business. The bulk of the S$19 billion life insurance portfolio will remain with Citi.

“We want to mirror what we have at Citi, so that any transfer of assets can be done quickly,” Chai explains.

The insurer made the final selection based on several factors. One was size; the provider had to have heft. Another was its ties, if any, to investment banks (Northern Trust is independent). Third was credit rating. Fourth was technology, for which Northern Trust is well known, says Chai; and fifth was people.

“The tipping point for us was Northern Trust’s people, who have shown enthusiasm and commitment to our business,” Chai says.

Next year, once around S$4 billion of assets are transferred to Northern Trust, NTUC will look at value-added services such as securities lending and collateral management.

Chai joined the insurer earlier this year after a career building foreign private banking operations in Singapore, including those of Julius Baer and ING Private Bank.

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