During an analyst call this morning, the senior executive team at French reinsurer SCOR confirmed that it has secured a new capital markets retrocession agreement with a Tier 1 bank, providing three years of stop-loss protection across both property and casualty (P&C) and life risks.
The retrocession, backed by third-party capital, will begin in January 2025 and last for a three-year term.
François de Varenne, Deputy CEO of SCOR, stated, “The main driver of the improvement in the solvency ratio is the implementation of an efficient third-party capital solution, providing us with 8 points of solvency relief this quarter, covering P&C and life risk and starting from January 1st, 2025.”
He added, “We are proud to have implemented such a retro structure in a short time with a cost which is very efficient.”
De Varenne also addressed concerns from investors and analysts regarding SCOR’s ability to maintain its solvency position following the 2024 life and health assumption review earlier this year.
“We have listened and believed this structure should provide comfort in our capital position,” he explained
When asked if this retrocession agreement would become a permanent part of SCOR’s capital structure, de Varenne clarified that the three-year stop-loss arrangement would be reassessed in the future: “It’s a three year stop-loss. So, we will see in three years if we still need this structure. But that’s done, and that’s implemented for three years.”
He further explained, “It’s a capital market solution which provides covers for both P&C and life risk, with an attachment point around 1-in-100 years. So that’s a very high attachment point.”
De Varenne emphasised, it is “an efficient tool in our internal model and solvency ratio,” and is set to provide a solvency benefit of 10 points on a full-year basis.”
He added, “We accounted already three quarters of the effect in Q3 of the effect of 2025, since the solvency ratio is 12 months forward-looking. So, we accounted 8 points in Q3, meaning we will still take the benefit of the remaining 2 points in the Q4 solvency ratio.”
Regarding costs, de Varenne mentioned, “it’s a low digit number in Euro, and we think it’s really efficient.”
Thierry Léger, CEO of SCOR, also commented on the new retro purchase: “I just wanted to re-emphasise what Francois just said. It’s a very efficient tool for us, in terms of providing capital, so we could imagine to continue to use this as part of our toolbox of efficient capital.”
When asked if this retrocession structure could be used going forward, Léger confirmed, “it’s a serious option.”
Later in the call, de Varenne explained that the retrocession’s 1-in-100-year attachment point applies to all events affecting SCOR’s P&C and life risks. He added that the annual attachment point resets each year and is very high, at “a few billion.”
This capital markets-backed retrocession reassures investors that SCOR can maintain its solvency ratio at adequate levels, even in the event of significant loss events affecting either the P&C or life sides. By leveraging the appetite of capital markets through a Tier 1 bank, SCOR is strengthening its balance sheet and long-term performance.
