Subordinate debt is an agreed unsecured debt between raiser and creditor(s) who has lower priority than other creditors, yet has higher priority over the raiser’s equity capitals.
Subordinate debt fund can be counted as Tier-II capitals in measuring an insurance company’s solvency status. Thus raising subordinate debt fund has become an important means of replenishing capitals by insurance companies. It is governed by CIRC’s Interim Measures on Management of Subordinate Term Debt of Insurance Company.
Subordinate debt has inherent risk. Creditors of insurance company’s subordinate debt can seek protection by virtue of the following methods: