SCOR Launches Contingent Capital Facility as Solvency Cover After Major Cat Event

SCOR announced the launch of a new three-year contingent capital facility, which provides the group with €300 million ($319 million) coverage in case of an extreme natural catastrophe or life events affecting mortality.

SCOR said the facility takes the form of a contingent equity line, which would enable the group to protect its solvency in case of catastrophic events.

This is SCOR’s third contingent capital facility with “its first, pioneering solution” launched on Jan. 1, 2011, the company said in a statement, noting that the new solution is consistent with the previous facilities.

The new contingent capital equity line was arranged with BNP Paribas and will replace, as of Jan. 1, 2017, the current contingent capital facility which comes to an end on Dec. 31, 2016. Under the arrangement, SCOR raises its protection by €100 million ($106.3 million) from the current facility.

The transaction will give rise to the issuance of approximately 9.6 million warrants issued by SCOR to BNP Paribas. Each warrant gives BNP Paribas the right to subscribe to two new SCOR shares without exceeding 10 percent of SCOR’s share capital, the company said.

The issuance of the warrants was authorized by an extraordinary general meeting of SCOR shareholders on April 27, 2016 and was approved by its board of directors on Oct. 26, 2016.

The solution “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 company said.

“This new contingent capital facility is fully in line with the active capital management policy at the heart of our three-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,” commented Denis Kessler, chairman & chief executive officer of SCOR.

“As well as being recognized in SCOR’s internal model, the solution has received substantial favorable qualitative and quantitative assessments from the rating agencies,” said SCOR.

In the absence of any extreme triggering event, no shares will be issued under the facility, which means it is “highly likely that this facility will reach its term without any dilutive impact” for shareholders, according to SCOR.

Source: SCOR