Contingent Hybrid Surplus Note Structure

Insurers are exposed to event risk from a variety of causes:

—Natural Catastrophes – Tornado, hurricane, flood, earthquake, conflagration

—Investment Market Disruptions – credit losses, “flights to quality”, equity market declines, real estate values decline

—Pandemic – death claims, morbidity losses, investment losses, operations risk

 Historically, many insurance companies have responded to such events by raising equity capital after the event – at depressed prices

—None anticipated the specific triggering event, but all recognized the potential for tail events

—All were required to raise capital at highly depressed values in order to survive.

—Many insurers have had to raise equity at depressed values to maintain ratings or even solvency

  —Contingent Capital can provide guaranteed access to capital at a pre-determined price when most needed

Author: Sameer_Jain

Partner. Sameer Jain is founder of FinTech, the world’s first portal that seamlessly integrates traditional, illiquid and alternative investments within portfolios. Prior to this he was Chief Economist & Managing Director at AR Capital. Before that he headed Investment Content & Strategy at UBS Alternative Investments. At UBS, he served as a non-voting member of the Wealth Management Research investment committee, and as a capital allocator was responsible for all illiquid investing including fund manager selection and due diligence across the platform. Prior to UBS he headed product development & investment research at Citigroup Alternative Investments that managed over $75 billion of alternative investments across hedge funds, managed futures, private equity, credit structures, infrastructure and real estate. Here he led a team that developed proprietary models for portfolio strategy and asset allocation with alternative investments, provided investment support and research to pension plans, sovereign wealth funds, endowments as well as internal clients including Citi Private Bank. Before this he was with Cambridge Alternative Investments and SunGard (System Access) where he travelled to over 80 countries for work across Europe, Asia, Middle-East and Africa. He has written over 30 academic and practitioner articles on alternative investments with thousands of downloads at SSRN, presented at over a hundred industry conferences and has coauthored a book, Active Equity Management. Mr. Jain has multiple degrees in engineering, management, public administration and policy and is a graduate of Massachusetts Institute of Technology and Harvard University. He is a recipient of the Alfred Sloan Fellowship and subsequently was a Fellow of Public Policy and Management at the Harvard Kennedy School of Government for a year. He holds Series 7 and 66 securities licenses.

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