Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Vitality Re VII Ltd. (Series 2016-1)

The Artemis Catastrophe Bond and Insurance-linked Securities Deal Directory aims to provide a one-stop resource for information on every cat bond and ILS transaction we hold information on. The content of this Deal Directory is provided as is and there will be some omissions. Help us to keep these cat bond and ILS transaction summaries up to date by contacting us if you see an error or omission that you can correct.


Vitality Re VII Ltd. (Series 2016-1) – At a glance:

  • Issuer: Vitality Re VII Ltd. (Series 2016-1)
  • Cedent / sponsor: Aetna
  • Placement / structuring agent/s: Goldman Sachs is sole bookrunner and co-structuring agent. BNP Paribas and Munich Re are co-managers and co-structuring agents
  • Risk modelling / calculation agents etc: Milliman Inc.
  • Risks / perils covered: Medical benefit claims levels
  • Size: $200m
  • Trigger type: Medical benefit ratio (indemnity)
  • Ratings: S&P: Class A - 'BBB+(sf)', Class B - 'BB+(sf)'
  • Date of issue: Jan 2016

Vitality Re VII Ltd. (Series 2016-1) – Full details:

This new transaction, Aetna’s seventh Vitality deal will be issued by a newly established Cayman Islands company Vitality Re VII Ltd., we understand from sources.

As with all the previous Vitality ILS transactions, Aetna will enter into a quota share agreement with its Health Re captive reinsurance company, which will in turn enter into excess of loss reinsurance agreements with the Vitality Re VII vehicle and Vitality Re II will sell two tranches of notes to ILS investors to collateralise those reinsurance agreements.

Vitality Re II will issue two tranches of notes, a $140 million Class A tranche and a $60 million Class B, of course both could grow while the deal is marketed depending on ILS investor demand. The coverage provided is indemnity protection for Aetna’s losses above a pre-defined medical benefit ratio trigger for each tranche and the notes are both structured on an annual aggregate basis.

The transaction will have a four-year term, covering losses suffered from January 2016 to the end of 2019, with the medical benefit ratio calculated on an annual basis to see whether Aetna’s claims have breached the trigger point and whether any payout is deserved.

The $140 million Class A tranche of notes to be issued by Vitality Re II will attach at a medical benefit ratio of 100% up to exhaustion at 114%. As ever the Vitality Re II notes are very remote risk, with an attachment probability of 0.03% and an expected loss of less than 0.01%. These notes are offered with price guidance of 1.5% to 2.15%, we’re told.

The $60 million Class B tranche of Vitality Re II 2016-1 notes are a little riskier, attaching at a medical benefit ratio of 94% and exhausting at 100%, so sitting beneath the Class A tranche of notes. This tranche has an attachment probability equivalent to 0.47% and an expected loss of 0.18%, so again very remote risk. This tranche is being marketed with price guidance of 2% to 2.65%.

For either tranche of notes to face a payout, the medical benefit ratio must breach the trigger attachment points within one of the annual risk periods.

These two tranches have a similar risk profile to the Vitality Re VI Ltd. (Series 2015-1) deal from last year, which paid investors 1.75% for the Class A tranche and 2.1% for the Class B, so the coupon guidance range the 2016-1 notes are being marketed with seems aligned.

Artemis Live - ILS and reinsurance video interviews and podcastView all of our Artemis Live video interviews and subscribe to our podcast.

All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance video content and video interviews can be accessed online.

Our Artemis Live podcast can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.

Print Friendly, PDF & Email

« Go back to the Catastrophe Bond Deal Directory

Help us keep this valuable resource up to date. If you have information on a catastrophe bond or insurance-linked security deal we have not covered or can see something that we should change, please contact us to let us know.