SCOR renews catastrophe & mortality contingent capital facility for fifth time

Global reinsurance firm SCOR has renewed its main contingent capital facility for the fifth time, continuing the balance-sheet coverage that protects the company against extreme natural catastrophe or mortality events, as well as against a significant decline in its share price.

It’s the sixth contingent capital arrangement that features triggers linked to SCOR’s natural catastrophe or life mortality loss event experience since 2010.

SCOR first issued contingent capital in 2010, when the reinsurance firm added a line of contingent equity capital to its tower of protection, a EUR 150m natural catastrophe coverage facility spanning three years.

That first contingent capital facility paid out for SCOR, as catastrophes in Q1 2011 triggered the contingent capital and enabled SCOR to drawdown on EUR 75 million of the facility, which it subsequently topped back up in 2012.

Then SCOR first renewed it in 2013 with a larger EUR 200 million contingent capital facility that the reinsurance company extended to cover both both natural catastrophe and extreme life (mortality) events for the first time.

This was followed in 2016 with another renewal, with SCOR also expanding it to EUR 300 million of protection, across both nat cat and mortality risks.

In 2019 SCOR renewed the contingent capital facility again, at EUR 300 million for a further three years of coverage, then most recently it was renewed again in 2022 for another three years when J.P. Morgan subscribed to it.

This latest and fifth renewal sees SCOR again locking in this contingent capital protection for a further three years, while J.P. Morgan is again backing it through a subscription to share warrants that would be exercised after a qualifying trigger event.

The renewed facility as again EUR 300 million in size and will protect SCOR through three calendar years from the start of 2026 to the end of 2028.

The contingent capital facility can be triggered and provide capital to SCOR in the event of an extreme natural catastrophe loss, an extreme event affecting mortality, or a significant fall in its share price.

Once again, the contingent capital facility is calibrated to pay out at levels that will protect SCOR’s own solvency level and dilution in the event of it being triggered is limited to a maximum of 10% of share capital.

The reinsurer explained, “SCOR’s management believes that this contingent capital solution provides its shareholders with a significant net economic benefit, insofar as it compares favorably with traditional retrocessions and ILS insurance securities and allows SCOR to improve the resilience of its balance sheet while optimizing its risk protection costs with a limited potential dilutive impact.”

This contingent capital arrangement remains one of SCOR’s key protections, alongside its retrocession program, its catastrophe bonds, reinsurance sidecar structures and other insurance-linked securities type arrangements.

Just like the ILS structures, this arrangement brings a diversified source of capital, from the capital markets being subscribed to by J.P. Morgan, to protect SCOR against events that might dent its balance-sheet.