Credit Suisse's CoCos Cause Concern for Investors and Insurers Alike

Credit Suisse's additional Tier 1 bonds, also known as CoCos, have been written down to zero by Swiss regulators as part of the bank's merger with UBS, spooking investors of the $275bn AT1 market. CoCos are hybrid capital instruments that absorb losses in times of stress and are structured to convert into equity when a bank's capital falls below a certain threshold. They were introduced after the 2008 financial crisis to steer risk away from taxpayers and onto bondholders. The move has wiped out bondholders but not shareholders, even though bondholders typically rank above equity holders in capital structure.