What is a Subordinated Debt?
Debt that ranks below senior creditors in the event of liquidation. Insurance companies issue subordinated bonds as regulatory capital.
Subordinated Debt
Debt that ranks below senior creditors in the event of liquidation. Insurance companies issue subordinated bonds as regulatory capital.
How it works in practice
An insurer issues a EUR 500 million subordinated bond that matures in 20 years. In the insurer's capital structure, this bond ranks below policyholder claims, senior debt, and trade creditors. If the insurer were liquidated, subordinated bondholders would be paid only after all higher-ranking creditors have been satisfied. This higher risk is reflected in a wider spread compared to the insurer's senior bonds.
Related glossary entries
A
B
C
D
E
G
H
I
L
M
N
O
P
R
S
T
V
W
Z
Learn ILS properly with ILS101
Move from definitions into structures, pricing, triggers, reinsurance applications, and specialist risk topics.
Start Learning