Global reinsurance giant SCOR, has announced the renewal for three years, of a contingent capital facility that will provide the firm with additional capital of up to €300 million of coverage against extreme natural catastrophes or life events impacting mortality.
The facility takes the form of a contingent equity line, and is the fourth renewal of this innovative facility, launched by SCOR.
SCOR’s first, pioneering contingent capital transaction was a €150 million natural catastrophe facility in 2010 which was triggered and resulted in a €75 million drawdown in 2011.
In 2012 this was then followed by an extension of the facility back up to the €150 million mark in 2012.
Then in late 2013, SCOR followed up with a renewal of its contingent capital facility, issuing a €200 million contingent equity line.
In late 2016 the reinsurer then launched a €300 million contingent capital facility, which expired at the end of 2019.
The reinsurer explained that contingent capital facility rests on share subscription warrants, issued by SCOR and subscribed by J.P. Morgan, which will be exercised automatically in the scenarios set out in the agreement.
The period covered by the renewed facility runs from January 1, 2023, to December 31, 2025.
SCOR also noted that in the absence of any triggering event during this period, no shares will be exercised, and SCOR has the option to terminate the agreement on December 31 of each year.
Under the terms of the facility, the exercise of the warrants could result in an increase in SCOR’s share capital of up to €300 million (including issuance premium), with the dilution limited to a maximum of 10% of the share capital in accordance with the authorization granted by the 2022 General Meeting.
The facility offers a very cost-effective alternative to traditional retro and ILS, and enhances the resilience of SCOR’s balance sheet.
Laurent Rousseau, Chief Executive Officer of SCOR, commented: “In a fast-changing environment driven by a number of paradigm shifts, SCOR has issued a new contingent capital facility and sticks to its strategic cornerstone of maintaining a robust capital shield.
“The renewal of this contingent capital facility is an essential part of our active capital management and balance sheet protection policy, which helps to protect the Group’s solvency and resilience at a low cost.
“We are building from a sound base to take advantage of market tailwinds such as the hardening of the P&C market, the increasing demand for life reinsurance products, and the increase in interest rates.”
