SCOR announces the launch of a new 3-year contingent capital facility. This takes the form of a contingent equity line, providing the Group with EUR 300 million 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 “Vision in Action” strategic plan.
This is the third contingent capital facility launched by SCOR – its first, pioneering solution was launched on January 1, 2011. This new solution is consistent with the previous facilities.
Following the authorization granted by the General Meeting of SCOR shareholders in April 2016, SCOR has arranged a new contingent capital equity line with BNP Paribas. This equity line facility will replace, as of January 1, 2017, the current contingent capital facility which comes to an end on December 31, 2016. Under this new EUR 300 million arrangement, SCOR raises its protection versus the existing contingent capital solution by EUR 100 million.
As with the previous facility, 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, in case of such major events. The solution also allows SCOR to diversify its ways and means of protecting 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 lower than that of the initial 2011 solution –, which minimizes 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 up to
EUR 300 million (including issuance premium), in respect of which SCOR has entered into a firm subscription commitment with BNP Paribas. The issuance of the shares would be triggered when SCOR has experienced total annual aggregated losses or claims from natural catastrophes or extreme events impacting mortality claims above a certain threshold, which is not made public, between January 1, 2017 and December 31, 2019.
As well as being recognized in SCOR’s internal model, the solution has received substantial favorable qualitative and quantitative assessments from the rating agencies. Of course, in the absence of any extreme triggering event, no shares will be issued under the facility. It is therefore highly likely that this facility will reach its term without any dilutive impact for the shareholders.
Denis Kessler, Chairman & Chief Executive Officer of SCOR, comments: “This new contingent capital facility is fully in line with the active capital management policy at the heart of our 3-year plan “Vision in Action” and helps to safeguard the Group’s solvency in case of extreme catastrophe events. 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.”