Insurance Australia Group proposed on Friday a restructure of its A$550 million of Reset Exchangeable Securities (RES) issued by its New Zealand subsidiary in 2005. Described as contingent capital, IAG has proposed that the RES, secured by a portfolio of short dated, high quality, securities, be brought on balance sheet to provide IAG with regulatory capital and equity credit for credit ratings. The short-dated securities portfolio would be sold and the funds released applied elsewhere in the business.RES holders are being offered an increase in the margin used to calculate the fully franked dividend paid, to 4.0 per cent over the bank bill rate, from the current 1.2 per cent. The reset date will also be extended to December 2019 from March 2010. At this time IAG can elect to either redeem the RES for A$100 each or convert them into IAG preference shares.A RES holder vote of 75 per cent or more in favour is required to make the changes. If the proposal does not proceed IAG will convert the RES into IAG preference shares prior to March 2010. The preference shares are essentially the same as the RES but come with a one time coupon step-up of one per cent payable ten years after issue (June 2012), if IAG has not already redeemed or converted the preference shares to ordinary shares.If the proposed RES restructure is accepted the IAG preference shares will be similarly restructured.