Securian Financial recognises the capital efficiencies gained from becoming the first U.S. direct writer of life insurance to tap into the capital markets for reinsurance protection using a mortality catastrophe bond, after its $100 million La Vie Re Limited (Series 2020-1) transaction completed.
The La Vie Re mortality catastrophe bond transaction now provides Securian Financial affiliate the Minnesota Life Insurance Company with a $100 million multi-year source of collateralized mortality reinsurance from the capital markets.
Mortality catastrophe bonds are rare enough in the insurance-linked securities (ILS) market, with only a handful outstanding.
But there has never been a mortality cat bond transaction sponsored by a direct writer of U.S. life insurance, so this could herald greater interest from that market in leveraging catastrophe bond structures to secure reinsurance protection.
“The La Vie Re issuance allows us to protect our balance sheet while strengthening our capital position and driving capital efficiency,” explained Warren Zaccaro, Securian Financial executive vice president and chief financial officer.
“We are very pleased with the reception from capital market investors on this inaugural ILS transaction, confirming both the quality of our portfolio and the marketplace’s interest in new risks.”
“Diversifying our reinsurance capacity by accessing the capital markets is a natural complement to our traditional reinsurance programs,” added Paul Rudeen, Securian Financial vice president and head of reinsurance. “Through this innovative transaction, we increase our current and long-term financial flexibility.”
La Vie Re, am unaffiliated special purpose insurer based in Bermuda, issued the $100 million of Series 2020-1 Class A notes to investors in a deal that closed on October 23rd.
The transaction is also the first Rule 144A catastrophe bond exposed to extreme mortality risk that features an indemnity trigger on an annual loss ratio basis, a more useful structure for the direct writers of life insurance risks.
Typically, reinsurers have sponsored mortality cat bonds with transactions featuring index triggers, tracking mortality rates in specific countries.
Thanks to this La Vie Re deal, Minnesota Life now has $100 million of fully collateralized excess of loss reinsurance protection for its insurance business, on an indemnity basis and over a three-year period.
Given the uncertainty still evident over the pandemic and how that could affect mortality rates if future significant waves occur, locking in mortality reinsurance now is likely a prudent move giving Securian greater certainty over the next few years.