What is a Hybrid Capital?
Securities with both debt and equity characteristics, including AT1, RT1, and certain subordinated instruments.
Hybrid Capital
Securities with both debt and equity characteristics, including AT1, RT1, and certain subordinated instruments.
How it works in practice
A European insurer needs to strengthen its capital base to meet Solvency II requirements but does not want to dilute its shareholders. It issues a subordinated bond that counts as Tier 2 capital under the regulations. The bond has a 30-year maturity, a call option after 10 years, and the ability to defer coupons if the insurer's solvency ratio drops below a threshold. It sits between equity and senior debt in the capital structure.
Related glossary entries
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