Vitality Re Ltd., medical benefit linked insurance-linked security closes

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As the year comes to a close its great to see such activity in the insurance-linked securities and catastrophe bond market as another deal closes. And its another innovative transaction, Vitality Re Ltd.,  which is a first in the market as it transfers medical benefit claims risk to the capital market on behalf of Aetna Life Insurance Company utilising catastrophe bond type insurance-linked securities.

The Vitality Re Ltd. deal covers the claims payments of Health Re Inc. (Aetna’s reinsurance SPV) and, ultimately, Aetna themselves when a medical benefit ratio (MBR) exceeds the pre-set MBR attachment level of 104%.

Originally the transaction was split into two tranches and aimed for $200m of cover for Aetna but only the Class A notes were issued in the end at a value of $150m. We’re not sure whether this was due to a lack of demand from investors (which we tend to doubt as this innovative deal should have been attractive) or whether other factors caused this downsizing.

Standard & Poor’s gave Vitality Re Ltd.’s single tranche $150m of Class A notes a rating of ‘BBB-‘.

Further details on Vitality Re Ltd. can be found in our previous article and in the Deal Directory.

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