Scor Triggers Contingent Capital

Chris Westfall
Chris Westfall

Shares of Paris-based Scor SE fell slightly in trading Tuesday after the company announced that it would draw on a 75 million euro contingent capital facility to pay for increased catastrophe losses.

SCOR will record an increase of its net pre-tax impact first quarter catastrophe losses of between 10 million euros to 15 million euros, according to a firm statement. The losses, which will be recorded in SCOR’s second quarter accounts, “reach the threshold for activating the contingent capital,” the firm says.

“SCOR estimates that the net pre-tax impact in its Q2 accounts of the natural catastrophes having occurred in Q2 will be contained within the 6 points of net combined ratio budgeted,” the Scor statement says “In addition, given its retrocession in place, no further deterioration of the Q1 natural catastrophe events on a gross basis is expected to materially affect its net accounts.”

Under terms of the deal the underwriter, UBS, will exercise equity warrants equal new SCOR shares totaling 75 million euros.

Insurance companies have ramped up their use of contingent capital as public markets have become less liquid. On Tuesday Reuters reported that Allianz SE plan to issue a 500 million “CoCo” bond in a private placement deal with Nippon Life. CoCo bonds are debt that quickly converts to equity, allowing easy access to capital during times of market stress.

While offering easy access to capital for a firm, equity shares issued once a contingent capital facility is triggered can also dilute existing shareholders.