# SWISS RE CAPITAL MARKETS CORPORATION X-17A-5 (2022-02-25) — Broker-dealer annual report - Company: SWISS RE CAPITAL MARKETS CORPORATION - Form: X-17A-5 - Filed: 2022-02-25 - Period: 2021-12-31 - Accession: 0001005135-22-000002 - CIK: 1005135 - File #: 8-48914 - Type: Broker-dealer - Material weakness: No - Auditor: KPMG - Auditor location: New York, NY - Contact: Jennifer Reid - Phone: 816-702-3315 - Signed by: Jennifer Reid (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1005135/000100513522000002/FULL_FIN_RPT_PUBLIC.pdf --- {0}------------------------------------------------ # Swiss Re Capital Markets Corporation Statement of Financial Condition December 31, 2021 {1}------------------------------------------------ | | Page(s) | |------------------------------------------------------------|---------| | This report contains the following: | | | Report of Independent Registered Public Accounting Firm 1 | | | Financial Statements | | | Statement of Financial Condition 2 | | | Notes to Statement of Financial Condition 3–7 | | {2}------------------------------------------------ ![](_page_2_Picture_0.jpeg) KPMG LLP 345 Park Avenue New York, NY 10154-0102 # **Report of Independent Registered Public Accounting Firm** To the Stockholder and the Board of Directors Swiss Re Capital Markets Corporation: # *Opinion on the Financial Statement* We have audited the accompanying statement of financial condition of Swiss Re Capital Markets Corporation (the Company) as of December 31, 2021, and the related notes (collectively, the financial statement). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2021, in conformity with U.S. generally accepted accounting principles. # *Basis for Opinion* This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion. We have served as the Company's auditor since 2021. New York, New York February 25, 2022 {3}------------------------------------------------ # Swiss Re Capital Markets Corporation Statement of Financial Condition December 31, 2021 | \$
78,929,691 | |------------------| | 1,148,904 | | 1,254,068 | | 1,077,224 | | \$
82,409,887 | | | | 1,889,503 | | 447,652 | | 149,997 | | 20,683 | | \$
2,507,835 | | | | | | | | \$
1 | | 74,967,961 | | 4,934,090 | | 79,902,052 | | \$
82,409,887 | | \$
\$ | The accompanying notes are an integral part of these financial statements. {4}------------------------------------------------ # 1. Nature of Operations and Organization of the Company Swiss Re Capital Markets Corporation (the "Company") was incorporated in Delaware on October 17, 1995, and effective May 19, 2020, Swiss Re Reinsurance Holding Company Ltd ("SRRH") contributed its minority interest of 23% to Swiss Re America Holdings Corporation ("SRAH"), making SRAH the 100% owner of the Company. SRAH is ultimately owned by Swiss Re Ltd (the "Parent" or collectively with its subsidiaries "Swiss Re Group"). The Company was established to conduct securities and investment business. During the year, the Company acted as lead and co-underwriter, conducted secondary market brokerage activities on Insurance Linked Securities transactions, and traded securities that are sensitive to insurance risks ("CAT securities") for its own account. The Company is a registered broker-dealer in securities under the Securities Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority. #### 2. Summary of Significant Accounting Policies ## Basis of presentation The financial statements are presented in conformity with accounting principles generally accepted in the United States of America ("US GAAP"). The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. #### Cash and cash equivalents The Company considers all highly liquid, unencumbered investments with an original maturity of three months or less when purchased to be cash equivalents. At December 31, 2021, cash & cash equivalents of \$78.9 million consist primarily of money market funds carried at cost. ### Interest income Interest income on financial instruments is recorded on an accrual basis using the constant effective yield method. #### Income tax paid in advance Estimated income tax withholding payments made to the Internal Revenue Service exceeding the Company's computed tax liability are reported as Income tax paid in advance on the Statement of Financial Condition. #### Translation of foreign currencies Assets and liabilities denominated in foreign currencies are translated at year end rates of exchange, while revenues and expenses are translated at average rates of exchange for the year. #### Income taxes Since December 27, 2017, the Company files a separate Federal income tax return. For state tax purposes, the Company continues to file certain combined state and local income tax returns with SRAH and affiliates. The tax allocation agreement provides that each member shall compute and pay its tax liability on a separate return basis. In computing their income tax liability on a separate return basis, member companies have the ability to recover taxes paid in a prior year or offset future taxable income to the extent net operating losses or other tax attributes that they generated, are carried back or forward in any manner permitted under the applicable law. {5}------------------------------------------------ Income tax expense or benefit is based on income or losses reported in the financial statements. Deferred tax assets or liabilities reflect temporary differences between amounts of assets and liabilities for financial and tax reporting. Such amounts are adjusted to reflect changes in tax rates expected to be in effect when the temporary differences reverse. The future tax benefits of deferred tax assets are recognized when the realization of such benefits is more likely than not. The deferred tax balance at December 31, 2021 is nil. # 3. Commitments and Guarantees Swiss Reinsurance Company, Ltd. ("SRZ"), an intermediary parent, has issued an unconditional guarantee in perpetuity covering all agreements entered into by the Company. In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that are not yet known. However, based on experience and its risk assessment, the Company expects the risk of loss to be remote. Any losses that may occur would be covered by the unconditional guarantee issued by SRZ. # 4. Fair value disclosures The fair value of a financial instrument is the amount that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). Financial assets are marked to closing prices, and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. In accordance with ASC No. 820, "Fair Value Measurements and Disclosures", a fair value hierarchy was established that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under ASC No. 820 are described below: #### Basis of Fair Value Measurement | Level 1 | Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities; | |---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Level 2 | Quoted prices in markets that are not considered to be active or
financial instruments for which all significant inputs are observable,
either directly or indirectly; | | Level 3 | Prices or valuations that require inputs that are both significant to the
fair value measurement and unobservable. | A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. {6}------------------------------------------------ # Swiss Re Capital Markets Corporation Notes to Statement of Financial Condition December 31, 2021 #### Estimated Fair Value of Financial Instruments Not Measured at Fair Value Certain financial instruments that are not carried at fair value on the balance sheet are carried at amounts that approximate fair value due to their short term nature and generally negligible credit risk. | | | | Notes to Statement of Financial Condition | | | | | | | |---------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------|-------------------------|--|--|--|--| | risk. | Estimated Fair Value of Financial Instruments Not Measured at Fair Value
Certain financial instruments that are not carried at fair value on the balance sheet are carried at
amounts that approximate fair value due to their short term nature and generally negligible credit | | | | | | | | | | liabilities. | | | The table below presents the carrying value of the Company's financial instruments which
approximate fair value. In addition, the table excludes the values of non-financial assets and | | | | | | | | | | Quoted Prices in
active markets for
identical assets and
liabilities | Significant Other
Observable Inputs | Significant Other
Unobservable
Inputs
(Level 3) | Total | | | | | | | | | | | | | | | | | Assets : | | (Level 1) | (Level 2) | | | | | | | | Cash Equivalents
Tax Recoverable | \$ | 78,929,691
\$
- | -
\$
1,254,068 | -
\$
- | 78,929,691
1,254,068 | | | | | | Other Assets | | - | 1,077,225 | - | 1,077,225 | | | | | | Total | \$ | 78,929,691
\$ | 2,331,293
\$ | -
\$ | 81,260,984 | | | | | | Liabilities : | | | | | | | | | | | Payable to Affiliates
Income Tax Payable | \$ | -
\$
- | 1,889,503
\$
447,652 | -
\$
- | 1,889,503
447,652 | | | | | | Deferred Revenue | | - | 149,997 | - | 149,997 | | | | | | Payable to third party | | - | 20,683 | - | 20,683 | | | | | # 5. Related Party Transactions The Company has extensive transactions and relationships with affiliated companies. Because of these relationships, terms of these transactions may not be the same as those that would result in transactions with unrelated parties. The Company has an agreement with SRAH, whereby certain services are performed on behalf of the Company. The Company incurs various expenses that are paid by SRAH, including legal and government relation services, office administration, auditing services, occupancy costs, compensation and benefits attributable to SRAH employees and other direct and allocated costs. At December 31, 2021, there was \$1.9 million payables outstanding under this agreement. The Company has an agreement with Swiss Re Life and Health America Holding Company ("SRLHAHC"), an affiliate, to provide advisory services, including, but not limited to, accounting, actuarial, tax and legal services. At December 31, 2021, there was a receivable of \$72 thousand from SRLHAHC reported in other assets in the Statement of Financial Condition. The Company has available \$1 billion in an uncommitted, unsecured short-term investment facility with SRAH. The facility bears interest based on LIBOR. Borrowings under the facility are not available in the computation of net capital pursuant to SEC Rule 15c3-1. As of December 31, 2021, the Company had no outstanding borrowings under this facility. At December 31, 2021, accrued interest of \$2 thousand is reported as Short-Term Loan Interest in the Statement of Financial Condition. The Company acts as introducing agent or underwriter on certain CAT securities transactions for SRZ. At December 31, 2021, there were \$0.8 million in receivable outstanding related to this activity. {7}------------------------------------------------ # Swiss Re Capital Markets Corporation Notes to Statement of Financial Condition December 31, 2021 The Company has an agreement with SRCML in which SRCML provides structuring services, sales and marketing support, as well as securities placement services for ILS offerings to European investors. At December 31, 2021, there were no amounts payable outstanding related to this activity. The Company has an agreement with SRCML in which SRCMC provides structuring services, sales and marketing support, as well as securities placement services for ILS offerings to US investors. At December 31, 2021, there were \$0.2 million in receivable outstanding related to this activity. The Company has an agreement with SRCME in which SRCME provides sales and marketing support, as well as securities placement services for CAT securities offerings to European investors. At December 31, 2021, there were no amounts payable outstanding related to this activity. On November 16, 2021 the remaining CAT securities were sold to and affiliate company, Swiss Re Risk Solutions (SRRS). The bonds were sold at the current market value of \$31.2 million. #### 6. Income Taxes At December 31, 2021, the total amount of unrecognized tax benefits, including interest and penalties was \$0. The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next twelve months. The consolidated income tax returns for tax years 2014 through 2016 for SRAH are currently being surveyed by the Internal Revenue Service. The consolidated income tax returns of SRAH and its subsidiaries are under audit by the Internal Revenue Service for tax years 2017 and 2018. As SRCMC left the consolidated group in 2017, it is only under audit for the short period in which it was a member of the group during that year. #### 7. Risk Factors #### Concentration of credit risk As a securities broker-dealer, the Company is engaged in various securities trading and brokerage activities in which counterparties primarily include broker-dealers, banks and other financial institutions. The Company acts as introducing agent and co-agent for a variety of transactions in secondary markets. In the event that the counterparties to transactions do not fulfill their obligations, the Company may be exposed to credit risk to the extent such obligations are unsecured. Also, if securities are not received, the Company is subject to risk of loss if the market value of such securities has increased over the contract amount of the transactions. The Company's exposure to credit risk associated with the nonperformance of counterparties in fulfilling their contractual obligations can be directly impacted by volatile trading markets which may impair their ability to satisfy their obligations to the Company. The Company has the right to pursue collection or performance from the counterparties who do not perform under their contractual obligations. ## Natural catastrophe risk {8}------------------------------------------------ # Swiss Re Capital Markets Corporation Notes to Statement of Financial Condition December 31, 2021 During 2021, the Company was exposed to principal losses on the proprietary CAT security positions it held if certain natural catastrophe events occur depending on the size, nature, and geographic location of the event. The Company follows Swiss Re Group guidelines and standards in quantifying its exposure. Risk limits are established by geographic concentration and catastrophe peril at the Swiss Re Group level. The Company exited this line of proprietary trading during 2021 and does not have any exposure as of December 31, 2021. # 8. Regulatory Requirement The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital, as defined, equal to the greater of \$250,000 or 6 2/3% of aggregate indebtedness. At December 31, 2021, the Company's net capital of \$75,969,155 exceeded required net capital of \$250,000 by \$75,719,155. The Company's ratio of aggregate indebtedness to net capital was 0.03 to 1. The Company does not claim an exemption from the provisions of Rule 15c3-3 pursuant to the Footnote 74 of the SEC Release No. 34-70073 adopting amendments to 17 C.F.R. § 240.17a-5. # 9. Subsequent Events The Company has evaluated whether any additional events or transactions have occurred after December 31, 2021 that would require recognition or disclosure in these financial statements through February 25, 2022, which is the issuance date of these financial statements, and determined that no such events or transactions have occurred. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.