News Reinsurance05 Dec 2019

Global:SCOR launches new contingent capital facility

| 05 Dec 2019

SCOR has announced the launch of a new three-year contingent capital facility which takes the form of a contingent equity line, providing the Group with EUR300m ($332m) coverage in case of extreme natural catastrophe or life events impacting mortality. The facility enables the Group to protect its solvency in case of catastrophe events and is consistent with the "Quantum Leap" strategic plan.

This is the fourth contingent capital facility launched by SCOR – its first, pioneering solution was launched on 1 January 2011. This new solution is consistent with the previous facilities.

SCOR has arranged a new contingent capital equity line with JP Morgan. This equity line facility will replace, as of 1 January 2020, the current contingent capital facility which comes to an end on 31 December 2019.

This protection would be triggered in case of extreme life events impacting mortality, as well as natural catastrophe events. It is calibrated to safeguard SCOR’s solvency. The solution also allows SCOR to extend its solvency and offers a very cost-effective alternative to traditional retro and ILS.

The probability that the events triggering the contingent capital facility will occur remains very low and is similar to the last contingent capital mechanism, which minimises the probability-weighted costs for SCOR and its shareholders.

Under the new facility, a drawdown may result in an aggregate increase in the share capital of SCOR up to EUR300m (including issuance premium), in respect of which SCOR has entered into a firm subscription commitment with JP Morgan.

Mr Denis Kessler, chairman & CEO of SCOR, said, “Our new strategic plan “Quantum Leap” sets out ambitious profitability and solvency targets given the current financial and economic environment. This new contingent capital facility is an essential part of the active capital management policy that is at the heart of our strategy. This facility protects SCOR’s solvency, at a very low cost for our shareholders, against events such as a global pandemic or a natural catastrophe of historic proportions.”

Triggers

The drawdowns of the facility will only be available when:

  1. the amount of the estimated ultimate net loss incurred by the SCOR group as an insurer or reinsurer (as reviewed by SCOR's statutory auditors) reaches pre-defined thresholds in a given calendar year from 1 January 2020, to 31 December 2022, as a direct result of the occurrence within that year of one or more natural catastrophe-type events, including but not limited to:

• earthquake, seaquake, earthquake shock, seismic and/or volcanic disturbance/eruption,

• hurricane, rainstorm, storm, tempest, tornado, cyclone, typhoon, • tidal wave, tsunami, flood,

• hail, winter weather/freeze, ice storm, weight of snow, avalanche,

• meteor/asteroid impact,

• landslip, landslide, mudslide, bush fire, forest fire and lightning.

Or, when 2) the amount of ultimate net claims of the SCOR group’s life reinsurance segment over two consecutive semesters over the period from 1 July 2019 to 31 December 2022, (as reviewed by SCOR's statutory auditors) reaches pre-defined thresholds as the consequence, in particular, of one or more of the following life business related events:

• deviation of epidemic, pandemic or a similar incidence or wide spread of one or more medical conditions deriving from any disease(s),

• acts of war, acts of terrorism,

• accidents due to non-natural cause(s),

• material deviation from forecast biometric trends (mortality, morbidity, disability or longevity) recorded by the life segment for any reason whatsoever.

 

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