Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Life returning to the life insurance securitization market, says Swiss Re


Global reinsurer Swiss Re see the recent successful completion of the Vecta I Ltd. embedded value life insurance securitization as a positive sign for the market. In this article from A.M. Best, Swiss Re’s Head of Life & Health Alison Martin says that the completion of Vecta I as the first securitization of embedded value of life insurance since 2007 shows that “life is coming back to the market”.

Swiss Re participated in the Vecta I deal as joint bookrunner. The deal saw sponsor Aurigen Reinsurance securitize mortality and lapse risk in a defined block of reinsured life policies enabling them to monetise the cash flows associated with the life insurance and mortality business upfront through the sale of notes to investors.

The market for embedded value life insurance securitizations came to an abrupt halt in 2007 due to the financial market crisis and since that date only private deals have been completed. The Vecta I transaction is the first 144a EV securitization since then and also the first ever to benefit a Canadian reinsurer.

In the Best article Alison Martin says that these types of life insurance securitizations should not be limited to Canada and that more such securitizations are expected from all jurisdictions. “It’s a very useful tool to help provide long-term funding for life insurance business,” Martin said. “It’s a good way of monetizing future profits. We see the potential for more transactions in the future.”

There was a time when it was thought that life insurance securitization could outstrip catastrophe bond issuance, due to the potential size of the market if deal flow could be sustained. Perhaps the Vecta I deal could herald a resurgence in life ILS, it would certainly be welcomed by investors and sponsors alike.

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