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CNP Assurances SA has sold the first euro-denominated Tier 3 bond, in what could herald a surge of issuance of the safest of an array of new instruments designed to make creditors share the burden if insurers run into trouble.
The [euro]1 billion bond due in Oct. 2022 pays interest of 1.875%, the lowest fixed coupon paid by CNP since its first subordinated issue in 1999, after orders totaled [euro]7 billion, reducing its average cost of financing by about 40 basis points. It was the second issuance of the new Tier 3 bonds established under Europe's new Solvency II regulations, after Aviva raised C$450 million in May, and the first in the continent's main currency.
Solvency II, the EU-wide insurance regulatory regime that came into effect Jan. 1, allows insurers to hold up to 15% of their solvency requirement in Tier 3 bonds, the least risky of three layers of burden-sharing capital. Tier 3 bonds, with a minimum tenor of five years, rank lower than senior debt...